A course designed as part of GTBank’s Accelerated Entry Level Programme (A-eLP)

COURSE TITLE:

Basic Accounting
Date: 2025
 IMPORTANT INFORMATION
This document is copyrighted property of Agusto Consulting
Limited, a wholly-owned subsidiary of Agusto & Co., and has been
prepared for the exclusive use of Guaranty Trust Bank Limited.
Agusto Consulting Limited may take legal action against any
unauthorized use of the document.
Administrative Information

Prerequisites Suitability Course Duration Course Format

None Accelerated 2 Days Slide

Entry Level Presentations;
Programme Class
Discussions;
Class Exercises
Learning Outcomes

▪ At the end of this course, participants would be able to:

• explain the meaning and purpose of accounting;
• explain the key accounting concepts; conventions, principles and assumptions;
• describe the process of recording accounting transactions;
• explain the contents of the key components of financial statements;
• describe the legal frameworks that underpin the preparation of financial statements;
• explain the steps in the accounting cycle;
• enter accounting transactions into the general ledgers and prepare a trial balance;
• explain the different methods for valuing inventory and non-current assets; and
• compute depreciation under each method; and
• identify common online accounting software used to record financial transactions &
prepare financial reports;
Course Outline
▪ What is Accounting? ▪ Accounting equation &
components
▪ Purpose of accounting ▪ Financial statements & their
components
▪ Business goals ▪ Important terms

▪ The main users of accounts ▪ Limitations of financial

Statements
▪ Key Accounting conventions,
principles and assumptions ▪ Legal issues, guidelines&
framework for Accounting
Course Outline (Cont’d)
▪ Steps in the accounting cycle capital expenditure
▪ Valuation of fixed assets
▪ Types of adjustments
▪ Fixed assets classification
▪ Accrual accounting entries
• Unearned Income ▪ Depreciation & depreciation
• Prepaid Expense methods
• Accrued Income
• Accrued Expense ▪ Some important terms
▪ Inventory valuation
▪ Common accounting software
▪ Summary of stock flow methods
▪ Fixed asset valuation – revenue &
Introduction

Basic Accounting
Accounting is…

▪ Accounting is the language used by professionals to report

the status of a business.

▪ Each transaction that a business enters into affects its

financial position.

▪ If there is a business…. Feedbacks(account) must be given

▪ Therefore, all transactions must be identified, quantified in

monetary terms, and recorded.
Business Formations

• A business entity occurs when it is involved in the act of pooling resources together
so as to produce goods or services with the aim of achieving an objective

• In order to understand any company’s financial statements, we must first understand

its operations and the nature of business ……..

Business Formations
• Sole Proprietorship
• Partnership
• Corporation

9
 10

Forms of Business Formation

Definition & Objectives of Accounting

Accounting can be “define" as an information system that provides reports to users

about the economic activities and condition of a business.

The Objectives of Accounting – letting people and organizations know:

• If they are making a profit or a loss
• What their business is worth
• How much cash they have
• Enough information so that they can keep a financial check on the things they do

❑ However, the primary objective of accounting is to provide information for decision

making

11
The Purpose and Relevance of Accounting in Business
▪ Accounting plays a vital role in running a business

▪ It helps business owners and other stakeholders in the following ways:

• To evaluate the performance of a business

• To ensure statutory compliance

• To make budgeting and financial projections easier

 13

What is Accounting

Accounting is the process of:

➢ Recording refers to creating Journal entry for every financial transaction with
Debit and Credit amounts.

➢ Classifying refers to grouping different transactions into similar accounts/ledgers

such as Asset, Liability, Capital, Revenue and Expenses.

➢ Summarizing refers to closing the books of accounts at the end of the period and
extracting a closing balance for each account into a table.

➢ Communicating financial information to interested persons. It involves preparing

the Financial Statements (Trading, Profit and Loss Account and Balance Sheet)

➢ Governed by rules / conventions

The Two Aspects of Accounting Information

Attribute Financial Accounting Management Accounting

Purpose Reports to external parties Reports to internal decision maker

Content and Format As specified by law or accounting As desired by management. Typically

standards. Usually aggregated detailed – often information on
information products, departments etc…..
Frequency Basically annual, NSE requires As desired by management. May be as
quarterly reports from big quoted frequent as daily
companies
Relevance Relatively low – designed to satisfy Very high – can be tailored to user’s
many users needs
Timeliness Low – well after the events High – Can be real-time information
and may even be projections

The KRC Limited 14

Users of Accounting Information
Should we invest in
Can we rely on Can we expect the coy
or maintain our
the coy as a to respect the
investment in the
source of tax environment, be fair to
coy?
revenue? Are our consumers, provide
regulations employment?
favorable to the
coy? Investors
Government Community
Should we
continue to Board of Directors Can we count
recommend Analysts Suppliers on the coy
Management being around to
the coy to
our clients? Employees buy our
Employees products?
Customers
Creditors
Can we
depend on
the coy for Can we expect the
regular Should we coy to continue to
Should we
supply? commend the provide jobs and
lend to this
mangers of the coy? pay decent wages?
coy or sack them?

15
Business Goals
▪ Businesses are tasked with ensuring that they meet two important
goals: Profitability & Liquidity

▪ Both goals must be met by every business

▪ Accounting helps to measure if and how these goals are being met.

▪ Profitability means that the firm must take in enough money from
customers to cover all the costs of doing business, with enough left over
as profit for the owners to want to stay in business. (Businesses that
successfully and consistently do this will attract investment capital.)

▪ Liquidity means that the business should have enough cash to settle
obligations as and when they fall due.

Source: [Link] and Agusto Consulting

Accounting Concepts & Equation
Adhering to the Guidelines

• There are rules, principles and concepts governing the preparation of financial statements.
• The generally accepted accounting principles in Nigeria are:
Statement of Accounting Standards (SAS) (formerly issued by NASB, now replaced with IFRS)
➢ Used in the preparation of financial statements in Nigeria
➢ International Financial Reporting Standards (IFRS) are accounting standards published
by the International Accounting Standard Board (IASB)

➢ They are used globally in the preparation of financial statements to produce high
quality, transparent and comparable financial information.
Benefits of IFRS

• Improved comparability of reported financial information by entities due to greater level of

disclosure requirement

• Easier access to foreign capital funding and cross-border stock exchange listings

• Investors will better understand the financial statements of Nigerian companies

• More effective management of enterprises and efficient processes since IFRS reporting is
performance based

• More transparent financial information to all stakeholders

The KRC Limited 19

 20

Accounting Concepts and Conventions

• The Accounting Concepts / Principles evolved out of the Practice and Procedures followed by
different countries and later on established by the International Statutory Accounting Bodies
to become an Accounting.

• Principle statutorily need to be followed while preparing the Financial Statements. In nutshell
this has evolved out of standard Practice followed by several countries while preparing the
Trading, Profit and Loss Account and Balance Sheet.

• The Accounting Conventions / Practices are basically assumptions and expected to be

followed while preparing the Financial Statements.
Business Entity Assumption
For accounting purposes, the business enterprise and its owners are two
separate independent entities. Thus, the business and personal transactions of
its owner are separate from each other.
▪ Accounting records of a business should be kept
separate from those of its owners and other
businesses. This prevents intermingling of assets
and liabilities among multiple entities, which can
cause considerable difficulties when a new
business’ financial statements are first audited.
Source: Flaticon

▪ Accordingly, a business’ affairs must be treated as

separate from the non-business activities of its
owners, whatever its legal status.

Source: JVM Education

Money Measurement Assumption
This concept assumes that all business transactions must be in monetary
terms (i.e., in the currency of a country. In our country such transactions are in
terms of Naira
Debtors/Creditors
▪ Accounting information has traditionally been concerned
only with those facts that can be measured in monetary
units. And to which most people will agree to the monetary
value of the transaction.
Goods
▪ This means that accounting does not reveal all the facts
about a business.

▪ This limitation is referred to as the monetary concept or

money measurement concept. Assets

▪ For instance, the morale and health of company personnel

cannot be expressed in monetary units, therefore accounting
does not consider such factors.
Going Concern Concept
This concept states that a business firm will continue to carry on its activities into
the foreseeable future. In other words, it expected to be dissolved within the next
one year, at a minimum.
▪ Financial statements are normally prepared on the
assumption that an entity is a going concern and
will continue business as normal going forward.

▪ Hence, we assume that an entity has neither the

intention nor need to liquidate or materially curb
its current scale of operations.

▪ Directors and auditors have a responsibility to

ensure that the going concern assumption is
appropriate, if it is to be used. Full disclosure is
required of any material uncertainties of
continuing as a going concern.
Going Concern Assumption - Example
▪ A trader commences business on 1 January ▪ Solution:
2021 and buys 20 computers, each costing
₦100,000. ▪ If the business is closed down, the remaining
computers must be valued at ₦60,000. Thus,
▪ During the year, he sells 17 computers for the total value realized in the forced sale will
₦150,000 each. be – 3 X ₦60,000 = ₦180,000

▪ How should the remaining machines be ▪ If the business is regarded as a going

valued at the end of the year in the following concern, the unsold computers will be carried
cases? forward into the following year and valued at
• The trader is forced to close down the cost – 3 X ₦100,000 = ₦300,000
business at the end of the year and the
remaining computers can only command
₦60,000 in a forced sale.
• He intends to continue his business
going forward.
Accrual Concept
Accrual concept states that the effects of transactions and other events are
recognized when they occur (and not when cash is paid or received)

Cash A/c (For 2010 - 11)

Particulars ` Particulars `

By Machinery 5,000

Furniture purchased Payments received on

on 29th March 2011 3rd April 2011

Source: JVM Education

Accrual Concept (Cont’d)
▪ Effects of transactions and other events are ▪ A retailer purchases 20 t-shirts in January 2017 at
recognized when they occur (and not when cash a cost of ₦500 each (total cost of ₦10,000). She
is paid or received) sells all the t-shirts for ₦1,000 each (total
revenue of ₦20,000). She therefore makes a profit
of ₦10,000 by matching the revenue earned
▪ They are documented in the accounting records
against the cost incurred.
and reported in the financial statements of the
period to which they relate.
▪ If the retailer had sold only 16 t-shirts, it is
incorrect to charge her income statement with
▪ Business entities should prepare their financial
₦20,000 as she still has four shirts in inventory.
statements on the basis that transactions are
recorded in them, not as the cash is paid or
received, but as the revenue or expense is earned ▪ Accordingly, only the purchase value of the 16 t-
or incurred in the accounting period they relate shirts sold (16 x ₦500 = ₦8,000) should be
to. matched with her sales revenue (16 x ₦1,000 =
₦16,000), resulting in a profit of N8,000
(₦16,000 – ₦8,000).
▪ In computing profit, revenue earned must be
matched against expenditure incurred in earning
it (matching principle)
Matching Principle
The matching concept states that the revenue and the expenses incurred to
earn the revenues must belong to the same accounting period.

Rent 24,000
Less for 2,000
2011 22,000

Source: JVM Education

Matching Principle (Cont’d)
▪ The matching principle states that expenses look at two different types of costs:
should be recognised and recorded when those • Product costs that can an be tied directly to
expenses can be matched with the revenues products and in turn revenues.
those expenses helped to generate. • Period costs, such as administrative salaries, that
cannot be tied to a particular period. They do
not have corresponding revenues.
▪ Expenses should be recorded as the
corresponding revenues are recorded and not
when they are paid. ▪ If an expense can be tied to current and future
revenue, then it is deferred to future periods
▪ This matches the revenues and expenses in a
period. ▪ This asset’s cost is then systematically and
rationally matched to future revenues (i.e. cost
▪ Matching Illustrates a “cause and effect allocated over all accounting periods during
relationship’’ between money spent to earn which asset is used, e.g. amortization)
revenues and the revenues.
▪ In consideration of the matching principle, we
Revenue Recognition Principle
This concept states that revenue from any business transaction should be
included in the accounting records only when it is realised. The term
realisation means creation of legal right to receive money

Assets 5,000

Source: JVM Education

Revenue Recognition Principle (Cont’d)
▪ The revenue recognition principle states ▪ Revenues are realized or realizable when a
that revenue should be recognized and company exchanges goods or services for
recorded when it is realized or realizable cash or other assets. If a company enters
and when it is earned. into a transaction to sell goods to a
customer, the revenue is realizable. A
specific amount of cash is identified in the
▪ Thus, companies should not wait until cash transaction. The revenue is not recorded,
is actually collected before recording in the however, until it is earned.
books.

▪ The company does not earn the revenue

▪ This is a key concept in the accrual basis of until it transfers the ownership of the
accounting because revenue can be inventory to the customer.
recorded without actually being received.
Materiality Principle

Relates to the significance of transactions, balances and errors contained in

the financial statements
The materiality concept, also called the materiality constraint, states that
financial information is material to the financial statements if it would
change the opinion or view of a reasonable person.

Accordingly, companies may omit certain information considered

immaterial to the financial statements.

The concept of materiality is relative in size and importance. Some

financial information might be material to one company but might be
immaterial to another. A large and material expense to a small company
might be small an immaterial to a large company because of their size
and revenue.

In determining how significant an item is, the importance/impact in the

overall context of the financial statements must be examined.

Image Source: Getty Images

Prudence Concept

Requires that accountants to exercise a degree of caution in the adoption of

policies and significant estimates such that assets and income of the entity
are not overstated while liability and expenses are not understated.
▪ This involves the exercise of caution in making estimates
under conditions of uncertainty, such that assets or income
are not overstated and liabilities and expenses are not
understated.

▪ Three key factors to consider:

• When alternative procedures of valuations are possible,
the one selected must give the most cautious result.
• Where there is a loss foreseen, it should be anticipated
or taken into account immediately
• Profits should be recognised when realized in the form of
cash or another asset with a reasonably certain cash
value.

Source: [Link]
Prudence Concept: Example
▪ Company XYZ commences trading on 1 at the full value of ₦100,000.
January 2021 and sells ₦100,000
during the year to 31 December 2021. ▪ Given the uncertainty that a portion of
sales may not be realized in cash,
▪ As at year-end 2021, there are prudence concept states that Company
accounts receivable outstanding of XYZ should make an allowance for
₦15,000.
receivables of ₦6,000, which is written
off against current year’s profit.
▪ Of these, Company XYZ is not
optimistic of ever receiving ₦6,000.

▪ Sales for the year are currently stated

Time-Period Principle

▪ Economic activities of a business entity can be divided into time periods for
reporting purposes. Most common: one month, one quarter and one year.

▪ Financial statements are prepared at regular intervals of one year.

▪ Further statements published between the annual ones are described as

‘interim statements’

▪ For internal management purposes, financial statements may be prepared

more frequently, on a monthly basis or even more often.
Full-Disclosure Principle

▪ The full disclosure principle states ▪ Anything that is relevant to users’

that information that would “make a decisions should be included in
difference” to financial statement financial statements
users or would be useful in decision-
making, should be disclosed in the ▪ Disclosures may be made:
financial statements. • Within the main body of the financial
statements
▪ Financial statements should report • As notes to the financial statements
any information that could affect the • As supplementary information, including
judgement or decision of an informed Chairman’s statement, CEO’s Review
user.
Substance Over Form Concept
▪ This states that transactions and other events must be accounted for and presented in
accordance with their substance and economic reality; and not merely their legal form.

▪ This is used "to ensure that financial statements give a complete, relevant, and accurate
picture of transactions and events“.

▪ A transaction should not be recorded in such a manner as to hide the true intent of the
transaction, which would mislead the users of a company's financial statements

▪ For instance, Company A sells an asset to Company B and the sales documentation states that
legal ownership has been transferred. However, there is an existing agreement where
Company A continues to enjoy future economic benefit arising from the asset. In substance, no
sale has occurred.

▪ Examples include finance leases, sale and leaseback transactions

Substance Over Form Concept - Example
▪ YXO Enterprises (YXO), a manufacturing asset, plus other related costs.
company, has obtained machinery from
BDO Supplies (BDO) on lease. ▪ However, ownership of the machinery
shall remain with BDO over the life of
▪ The machinery shall be available only to the lease and the physical custody of
YXO Enterprises for the next 9 years machinery shall be transferred back at
(useful life is 10 years). the end of the lease term.

▪ The machinery shall be tailored to meet ▪ What is the economic substance of the
specific needs of YXO. transaction and how does it differ from
the legal form?
▪ YXO is expected to make quarterly
payments, which when discounted
appropriately equals the cost of the
Substance Over Form: Answer/Solution
▪ BDO still retains ownership of the ▪ Consequently, YXO has undertaken a
machinery. So, the legal form of the liability equal to the cost of the asset by
agreements dictates that YXO should not entering into the agreement.
record the machinery as an asset.
▪ The transaction is best reflected in the
▪ However, YXO is in control of the financial statements by showing the
economic benefits accruing from the use machinery as an asset and also
of the machinery for the majority of its presenting a corresponding lease
useful life. liability.

▪ The present value of the lease payment

is fairly equal to the fair value of the
machinery.
Cost-Benefit Principle
▪ The cost-benefit principle states that the cost of providing financial information in
the financial statements must not outweigh the benefit of that information to the
users.

▪ Financial information is not free as companies spend time and money every year
gathering and organizing financial information towards the assembly of financial
statements.

▪ In determining what to include in a financial report, companies must weigh the costs
of providing particular information against the benefits derived from using the
information.

▪ Thus, companies may not require certain accounting measurements or disclosures if

the costs of implementing them exceed the benefits accrued to users of the
information.
Class Discussion/Brainstorming Session

In your view, which

accounting concept /
principle is the most
important and why?

Image Source: Flaticon

Class/Group Discussion

▪ Describe the following accounting concepts

• Going concern principle

• Revenue recognition principle

• Matching principle

• Prudence concept

Image Source: Flaticon

The Accounting Equation
The Accounting Equation

▪ The resources (assets) required by the 1st party (the business) to conduct its
affairs must be provided by either the 2nd party (owners of the business) or a
3rd party (creditors)

▪ At commencement of a business:
Assets Equity

▪ Where some resources have been provided by third parties:

Assets Equity Liabilities

Accounting Equation

Asset = Liabilities + Equity

•Equity = Original Contribution + Profit

•Profit = Revenue – Expense

Asset = Liabilities + Original Contribution + Revenue – Expenses

Asset + Expenses = Liabilities + Original Contribution + Revenue

ILLUSTRATION

The following transactions took place in the month of January 2024 in Freeman Company:
Show the effects of these transactions on the Accounting Equation;

o 1-Jan: Started business with N 1,000,000 in its current account

o 2-Jan: Bought a motor vehicle for N 200,000 paying with a cheque
o 6-Jan: Purchased equipment for N 400,000 and paid with a cheque
o 9-Jan: Borrows N 800,000 from Warranty Bank Limited
o 12-Jan: Withdrew N 10,000 from bank for petty cash
Assets

What are they?

▪ Resources controlled by an enterprise as a result of past events

and from which future economic benefits are expected to flow to
the enterprise
▪ May be
• Tangible ( e.g. buildings, cars etc.) or intangible (e.g. patents,
goodwill, etc.)
• Current (e.g. prepaid rent) or non-current (e.g. investment in
subsidiaries)

▪ Indicates income generating capacity

Assets

How are they recorded?

▪ Assets are usually recorded in the Statement of Financial Position under two categories:
current assets and non-current assets.
▪ Non-Current Assets:
• Property, plant & equipment
• Investment properties
• Other non-current investments
• Goodwill, intangibles & other long-term assets
▪ Current Assets:
• Trading assets
✓ Stock (finished goods, work in progress, raw materials etc.)
✓ Trade debtors
✓ Due from related parties
✓ Other debtors & prepayments
✓ Cash & cash equivalents
Liabilities

What are they?

▪ Obligations of an enterprise arising from past
transactions or events, the settlement of which may
result in an outflow of economic benefit in the
future
▪ These obligations will be settled using assets
▪ They are third party claims on the business
▪ May be current or non-current
▪ May be interest bearing and non-interest bearing
▪ Examples; overdraft, creditors, tax payable etc.
Liabilities

How are they recorded?

▪ Liabilities are usually recorded in the Statement of
Financial Position under two categories: current
liabilities and non-current liabilities
▪ Current Liabilities
• Trade payables
• Short term borrowings
• Dividend payable
• Taxation payable
▪ Non-Current Liabilities
• Long term borrowings
• Deferred tax liabilities
• Retirement benefit obligations
Equity
▪ This refers to the owners’ claim on the business’ net
assets
What makes up Equity?

▪ Total assets less liabilities

• Share capital
▪ Also known as shareholders’ funds
• Share premium
• Irredeemable debentures
▪ Made up of; • Revaluation Surplus
• Owners’ contribution • Other non-distributable reserves
• Revenue reserves
✓ Initial and subsequent contribution
✓ Share premium
• Retained profit i.e. reserves, retained earnings.
Class Quiz

State whether the following will be included as a liability, asset or equity in the
statement of financial position:

Electricity bill for

November and December
Rent paid in advance received after the Unpaid dividend
company’s financial year
ended 31 December

Payment for sales to

Profit retained customers not yet
received by the firm
Class Quiz
1. The accounting process does not include:
[Link]
[Link]-making
[Link]
[Link]

2. Which of the following is not a feature of the separate entity concept?

[Link] and owner are treated as separate entities
[Link] affairs of the owner should not be considered
[Link] should not be dissolved in the near future
[Link] concept is followed in all types of businesses
Class Quiz
3. Matching concept does not include one of the following:
[Link] revenues of a particular period must match with the expenses of that period.
[Link] concept also required allocation of cost on different accounting periods.
[Link] should only be recorded if there is reasonable certainty about its realization
[Link] comparison of incomes and expenses of a period gives the net profit or loss for that
particular period.

4. According to accrual concept of accounting, financial or business transaction is recorded:

[Link] cash is received or paid
[Link] transaction occurs
[Link] profit is computed
[Link] balance sheet is prepared
Class Quiz

5. A company is a going concern if:

[Link] balance sheet shows a strong financial position
[Link] income statement for the current year shows huge profit
[Link] is no evidence that it will or will have to cease operations within foreseeable future.
[Link] is a public limited company

6. Which one of the following states that the life of a business can be divided into equal time
periods?
[Link] concept
[Link] recognition principle
[Link] entity concept
[Link] concept
The Effect of Profit and Loss on Capital
Illustration:
On 1 January the assets and liabilities of a business are:
Assets: Fixtures N10,000; Inventory N7,000; Cash at the bank N3,000
Liabilities: Accounts payable N2,000
The capital is found from the accounting equation:
Capital = Assets – Liabilities
In this case, capital is N10,000 + N7,000 + N3,000 – N2,000 = N18,000
During January, the whole of the N7,000 inventory is sold for N11,000 cash. On 31
January the assets and liabilities have become:
Assets: Fixtures N10,000; Inventory nil; Cash at the bank N14,000
Liabilities: Accounts payable N2,000
The capital is now N22,000
Old capital + Profit = New capital
55
Effects of Transactions on the Accounting Equation

The KRC Limited 56

 Class Exercise
Complete the gaps in the following table: A=L+C // C=A-L // L=A-C

ASSETS LIABILITY CAPITAL

N N N
A 100,000 20,000 ?
B ? 40,000 50,000
C 50,000 ? 20,000
D 60,000 40,000 ?
E ? 50,000 10,000

The KRC Limited 57

 Class Exercise

• Akinoluwa Limited has just been set up.

• Before commencement of operations, the Company bought the following: Motor
vehicles N 12m, Machinery N 15m, Furniture and fittings N 10m.
• The Company still owes N 10m on the Machinery and has N 25m in an account with a
local bank after taking a loan of N 8m from this bank.
• All these transactions occurred on 31 December, 2012.
• Calculate the business' share capital as at 31 December, 2022.
Class Exercise
Determine the overall effect of each transaction on the assets, liabilities and
capital of the business. Indicate whether there is an increase (+), a decrease (-
), or no effect (NE) on each of them.
Transactions  Effects upon→→
Assets Liabilities Equity
a) Invested N 10,000 cash in business Cash/+10k NE Capital/+10
k
b) Purchased Generator worth N 5000 on credit Gen/+5k Payable/+5 NE
c) Paid the liability for office equipment bought on credit by Bank/-N Payable/-N NE
cheque.
d) Paid N 5m into creditors current account Bank/-5m Payable/- NE
5m
e) Owner withdrew N 250, 000 from current account for personal Bank/-250 NE Capital/-250
use
f) Paid N150,000 cash to buy Generator Cash/-150 NE NE
Gen/+150
g N 150, 000 cash is received from a debtor owing N150,000 Cash/+150 NE NE
Receivable/-150
h N 150, 000 cash is received from a debtor owing an outstanding Cash/+150 NE Bad debt/-
N 300,000 as full and final settlement Receivable/-300 150
Paid employees' salaries in cash N 150,000 59
i Cash/-150 NE Salary/-150
Financial Statements
Content of Financial Statements – CAMA and IFRS

Notwithstanding the provisions

At a minimum, A CAMA-compliant Financial of CAMA 1990, the adoption of
IFRS by Nigeria in 2010
Statement should have introduced several changes such
as:
▪ Statement of the accounting policies ▪ Balance Sheet is now called –
Statement of Financial Position
▪ The balance sheet as at the last day of the year
▪ A profit and loss account or, in the case of a company not ▪ Profit and Loss Account is now
trading for profit, an income and expenditure account called – Statement of
▪ Notes on the accounts Comprehensive Income
▪ The auditors' reports ▪ Value-added Statement is no
▪ The directors' report longer a principal component of
▪ A statement of the source and application of fund financial statement.
▪ A value‐added statement for the year ▪ Statement of Changes in Equity
▪ A five‐year financial summary; and not required by CAMA1990 is
▪ In the case of a holding company, the group financial now required.
statements
Statement of Financial Position (SFP)
▪ The Statement of Financial Position (formerly Balance Sheet) can be referred
to as a “snapshot’ of the company’s financial position at a particular point in
time (typically at the end of an accounting year)

▪ It shows items that can be classified under these three sections:

Owners’
Assets Liabilities
Equity

▪ It gives an indication of what a company owns, owes and the amounts

invested by owners
 SFP Sample - Non-Financial Institutions
As at 31 December 2021 As at 31 December 2021

ASSETS ₦'000 EQUITY ₦'000

Non Current Assets Share capital 455,175
Retained earnings 40,139,626
Property, plant and Total Equity 40,594,801
equipment 65,878,425
Intangible assets 573,247 LIABILITIES
Total Non Current Assets 66,451,672 Non Current Liabilities
Current Assets Loans and borrowings 26,471,275
Employee benefits 7,908,309
Inventories 9,853,893
Total Non Current Liabilities 34,379,584

Trade and other receivables 17,884,775 Current Liabilities

Prepayments 300,637 Loans & borrowings 4,167,045
Trade & other payables 29,066,050
Total Current Liabilities 33,233,095
Cash and cash equivalents 13,716,503
Total Liabilities 67,612,679
Total Current Assets 41,755,808
Total Assets 108,207,480 Total Equity & Liabilities 108,207,480
SFP Sample - Financial Institutions
Assets ₦'000
Liabilities ₦'000 Equity ₦'000
Cash and balances with central 702,268,396
banks Deposits from banks 682,850,169 Share capital and premium 353,626,651
Financial assets held for trading 8,055,877
Deposits from customers 4,235,152,463 Retained earnings and 193,381,893
Derivative financial instruments 50,121,409
Derivative financial instruments 4,024,115 reserves
Loans & advances to banks 479,274,331
Borrowed funds 441,381,275 547,008,544
Loans & advances customers 2,899,677,797
Treasury bills and other eligible 370,756,918 Other liabilities 414,588,105
bills
Provisions 11,136,290 Non-controlling interests 55,582,030
Investment securities available for 1,122,980,007
sale Current tax liabilities 11,978,738 Total Equity 602,590,574
Pledged assets 159,781,665
Deferred income tax liabilities 17,928,799
Other assets 239,117,442
Retirement benefit obligation 5,267,292
Investment in associates 3,036,363 Total Liabilities and Equity 6,458,042,722
Intangible assets 86,103,203 5,824,307,246
Property, plant and equipment 273,623,879
Investment properties 9,369,105 Liabilities held for sale 31,144,902
Deferred income tax asse 31,393,905 Total Liabilities 5,855,452,148
6,435,560,297

Assets held for sale 22,482,425

Total Assets 6,458,042,722
Statement of Comprehensive Income (SCI)
▪ It shows the revenue and expenses of the business within the accounting year.

▪ Formerly known as the Income statement (or Profit & Loss Account)

▪ It shows the profit or loss transferred to capital in the Statement of financial position

▪ The following are important items that can be found in the Statement of
Comprehensive Income:
Statement of Comprehensive Income (SCI)
What it consists of:

•Turnover
•Cost Of Sales
•Gross Profit
•Administrative & Operating Expenses
•Operating profit
•Other Income/(Expenses)
•Profit before interest & tax
•Interest Expense
•Profit Before Taxation
•Taxation Paid For The Year
•Profit After Taxation
•Dividends Paid (If Any)
•Profit Retained For The Year
Important Terms
Revenue
• Gross amount earned over a period from normal activities
• May or may not be collected in cash

Expenses
• Costs incurred over a period of time on normal activities
• May or may not have been paid in cash
• Examples are cost of sales, payroll expenses, rent, stationery etc.

Gain or loss
• From peripheral activities
• Reported net i.e. proceed is matched against associated cost
• Non-recurring in nature
Presentation of Financial Statement
▪ The financial statement of a non-financial institution and that of a financial
institution differ largely because of the nature of their business:

Non-Financial Institution Financial Institutions

• Top-line item in SCI is Turnover

• Top-line item in SCI is usually
Interest Income
• Biggest item in SFP is PPE • Biggest item in SFP is often
Deposits from Customers
• Biggest expense is typically COS • Biggest expense is typically interest
expense
SCI Sample - Non Financial Institution
2021 2020
₦'000 ₦'000
Revenue 133,084,076 116,707,394
Cost Of Sales (76,298,147) (66,538,762)
Gross Profit 56,785,929 50,168,632
Selling And Distribution Expenses (9,947,051) (14,720,937)
Administrative Expenses (4,947,051) (9,720,937)
Operating Profit 41,891,827 25,726,758
Other Income/(Expenses) 28,952,949 24,179,063
Profit Before Interest and Tax 70,844,776 49,905,821
Net Finance Income/(Costs) (3,638,298) (3,251,693)
Profit Before Tax 67,206,478 46,654,128
Income Tax Expense (20,161,943) (13,996,238)
Profit For The Year 47,044,535 32,657,890
Other Comprehensive Income Net Of Tax 8,521 8,010
Total Comprehensive Income For The Year 47,053,056 32,665,900
 SCI Sample - Financial Institution
₦'000
Interest Income 241,906,218
Interest Expense (99,167,552)
Net Interest Income 142,738,666

Fee and commission income 69,276,503

Fee and commission expense (8,976,917)
Net trading income 71,103,695
Other operating income 4,572,372
Non-interest revenue 135,975,653

Operating income 278,714,319

Staff expenses (77,001,550)

Depreciation and amortization (13,784,405)
Other operating expenses (78,178,190)
Operating expenses (168,964,145)

Operating profit before impairment losses and taxation 109,750,174

Impairment losses on :
loans and advances (49,016,549)
other financial assets (14,415,909)
Impairment losses on financial assets (63,432,458)

Operating profit after impairment losses 46,317,716

Share of profit of associates (76,131)

Profit before tax 46,241,585

Taxation (8,545,205)
Profit for the period from continuing operations 37,696,380
Income Lines
Income Line Source Drivers

Interest income Loans and advances (risk assets), placements, Interest rate
Investment (T. Bills, bonds) Value of loans
Placements/investments

Commissions Foreign funds transfer service Volume of transactions

Letters of credit commission Value of transaction
Bills for collection commission Activity on current account
Sale of FX (COT)
COT

Fees Management fee Value and volume of credit facilities

Processing fee /related transaction
Commitment fee

Others Profit on sale of fixed assets Disposal of fixed assets

Profit on disposal of shares Partial or full divestment
Dividend
Expense Lines
Expense Line Source Drivers

Interest Expense Deposit accounts (demand, time, savings, Interest rate

domiciliary) Mix of deposit accounts

Loan loss expense Loans and advances Volume of non-performing assets

Other account receivables Early problem recognition
Other assets (due from Fls)
Investment

Operating expenses Staff costs Number and quality of staff

Premium on insurance of deposit Liabilities Value and age of assets
Depreciation Efficiency in administration &
Admin & marketing expenses marketing
Utilities & communication cost

Others Loss on disposal of assets Disposal of fixed assets

Loss on disposal shares Partial or full divestment
Statement of Cash Flow
▪ The Cash Flow Statement is the segment of a firm’s financial statements that
shows the company’s sources of cash inflows and the direction of its cash
outflows.

▪ It shows how much cash the business was able to generate over its accounting
period. The Cash Flow Statement is divided into cash used in or generated
from:
Operating activities

Investing activities

Financing activities

▪ We shall learn more about the cash flow statement later in the course
CASH FLOW - EXERCISE
• Classify the activities below into Operating (O), Investing (I) or Financing (F) Cash flow
o Cash payment of insurance premium
o Cash payment of rent
o Cash receipt of rent
o Cash payment of interest
o Cash receipt of interest
o Cash payment of dividend
o Cash receipt of dividend
o Cash payment of taxes
o Collection of receivable
o Payment for tangible non-current assets
o Sale of investment
o Repayment of loan
o Payment of trade creditors
o Payment for import duty
How the three Core Statements Connect

Source: Missdollar Caem/SlideShare

Class Quiz

1. The best definition of assets is the

a. cash owned by the company.
b. collections of resources belonging to the company and the claims on these resources.
c. owners’ investment in the business.
d. resources belonging to a company that have future benefit to the company.
2. A firm buys products but does not pay to suppliers instantly. This is recorded as
[Link] Receivable
[Link] Payable
[Link] Liabilities
[Link]-Current Liabilities
Class Quiz

3. The income statement heading will specify which of the following?

a.A POINT In Time
b.A PERIOD Of Time

4. A company disposes of equipment that it no longer uses in its business. The amount received
by the company is more than the amount the asset is carried at in the accounting records. The
company will report a(n) __________.
[Link]
[Link]
[Link]
[Link]
 Class Exercise

Motor vehicles= Salaries and wages = Postage =

Classify the following
into assets, liabilities, Rent paid= Rent owed to landlord = Creditors for goods =
capital, revenue and
expenses in the Office equipment = Overdraft given to customer = Commission earned =
financial statements of
Ariya Nigeria Limited. Interest expense = Loans = Plant and Machinery =
Interest received =
Equity = Interest income = VAT payable =

Interest receivable = Fixtures and fittings = Loan to Okonkwo & Co=

Interest Payable =
Bank overdraft = Accounts payable for Cash in hand =
inventory=
Accounts receivable = Retained profit=

The KRC Limited 78

Accounting Records & Systems
Steps in The Accounting Cycle

Analyze Enter Post entries Prepare

Prepare
source transactions to accounts financial
trial
documents. in the in the statements.
balance.
general general
journal. ledger.

Most of these activities are now automated and

performed by ICT tools
Source Documents
▪ Source documents are the original records for all transactions in an organisation.

▪ These documents capture the details of the transaction at the origin and subsequent recording
of the transaction will be based on the details on the source documents.

▪ Key information found on a source document include:

• Date of the transaction
• Brief detail of the transaction
• Units sold or purchased
• Amount of the transaction in Naira
• Signature of authorising/approving officer
Source Documents
Types of source document

▪ Receipts: is an evidence of payment to or by an entity.

▪ Sales Invoice: shows the amount due to a company from a client.

▪ Credit Note: used to show a reduction in the indebtedness of client either

because of returned items previously sold on credit.

▪ Debit note: used to reduce the indebtedness of the company to its creditors or
suppliers, either because of returned goods bought on credit.
Double Entry System
This is an accounting principle that provides for all transaction to be treated twice in the
financial statement. Therefore, for every credit entry there must be a corresponding debit
entry.
Debit

▪ Debit is the portion of transaction that accounts for the increase in assets and
expenses, and the decrease in liabilities, equity and income.

Credit

▪ Credit is the portion of transaction that accounts for the increase in income,
liabilities and equity, and the decrease in assets and expenses.
Double Entry System

Debit (Dr.) Credit (Cr.)

Asset Liability

Expenses Equity
Income

Liability
Asset
Equity
Expenses
Income
Double Entries for Expenses and Revenues

Increase Action Decrease Action

June 1 Expense of postage Debit postage Asset of cash Credit cash account
Paid for postage account
stamps by cash N50

June 2 Expense of Debit electricity Asset of bank Credit bank account

Paid for electricity electricity account
by cheque N229

June 3 Asset of cash Debit cash account No decrease to No action to take

Received rent in record
cash N138 Revenue of rent Credit rent received
account

June 4 Expense of Debit insurance Asset of bank Credit bank account

Paid insurance by insurance account
cheque N142

85
Class Exercise
Complete the following table, showing the accounts to be debited and those to be credited in Balak
Nigeria Limited’s account:
Transaction Account to be debited Account to be Credited
Sold goods on credit
Bought goods by cash
Paid salaries by cheque
Bought goods on credit
Earned interest on Investment
Paid for stationery by cash
Customer paid a cheque for goods bought on credit
Withdraw cash from bank for office use
Bought motor vehicle by cheque
Paid interest on loan by cheque
Paid company tax by cheque
Paid rental expenses by cheque
Receive rental income by cheque

86
Chart of Accounts
▪ A chart of accounts (COA)
is a financial
organizational tool that
provides a complete listing
of every account in an
accounting system.
(Recall: An account is a
unique record for each type
of asset, liability, equity,
revenue and expense.)
▪ The full list of accounts
(with their proper,
numbers, types and nature
of accounts is shown in the
COA

Source: FitSmallBusiness
Journal Entry
▪ Journals are referred to as book of prime entry.

▪ They typically contain details of non-routine ledger transfers.

▪ Transactions are first recorded in the Journal before taking it into the accounts.

▪ Subsequently, items in the Journal are transferred to each account that was
affected by the transaction.
Types of Journals: Books of Original Entry
▪ The commonly used books of original entry are:

• Sales Journal (or Sales Day Book) – for credit sales

• Purchases Journal (or Purchases Day Book) – for credit purchases
• Cash Book – for cash and cheque receipts and payments
• General Journal – for other items
Ledger Accounts
▪ These are typically T-accounts that show individual records of transaction.

▪ A separate ledger is prepared for each class of account in the organization.

▪ Ledger accounts are closed when all transactions for the given period is
concluded.

▪ A balancing figure (balance c/d) is posted on the lesser side of the T-account,
while the balancing figure is transferred to the opposite side as balance b/d,
which becomes the beginning balance at the next period
Preparing a General Ledger
▪ Imagine you started a business with the following transactions
• Capital injection - ₦2,000,000
• Rent - ₦100,000
• Purchases - ₦500,000
• Sales - ₦800,000
• Vehicle - ₦1,400,000

▪ Prepare the ledger account to show this transaction

Capital injection - ₦2,000,000

Dr Cash Account CR Dr Capital Account CR

₦ ₦ ₦ ₦
Capital 2,000,000 Cash 2,000,000
Rent - ₦100,000

Dr Cash Account CR Dr Rent Account CR

₦ ₦ ₦ ₦
Cash 2,000,000 Rent 100,000 Cash 100,000
Purchases - ₦500,000

Dr Cash Account CR Dr Purchases Account CR

₦ ₦ ₦ ₦
Cash 2,000,000 Rent 100,000 Cash 500,000
Purchases 500,000
Sales - ₦800,000

Dr Cash Account CR Dr Sales Account CR

₦ ₦ ₦ ₦
Cash 2,000,000 Rent 100,000 Sales 800,000
Sales 800,000 Purchases 500,000
Vehicle - ₦1,400,000

Dr Cash Account CR Dr Vehicle Account CR

₦ ₦ ₦ ₦
Cash 2,000,000 Rent 100,000 Cash 1,400,000
Sales 800,000 Purchases 500,000
Vehicles 1,400,000
Trial Balance
▪ This is the summary of all ledger balances. It is the start-off point in the
preparation of financial statements.
Recall the accounting operation:

Consequently, all assets and expenses should have a debit balance, while
liabilities, capital and income should have a credit balance on the trial balance.
 Class Exercise

Write up the following transactions in the relevant ledger accounts of AELP Limited and extract a trial balance as at 31 Dec.

• July 1 Started business by paying N10, 000 into bank account

• 3 Withdrew cash N4, 000 from bank
• 4 Akande bought goods worth N1, 750 on credit
• 5 Bolaji supplied goods worth N500 on credit
• 6 Fixtures supplied on credit from Motuns for N120
• 7 Bought Generator for N2, 000 in cash
• 11 Returned goods worth N200 to Bolaji
• 21 Nosike, a Director, lends the company N300 in cash
• 22 Paid Bolaji N120, 000 cash
• 30 Invested N900 in bank shares by cheque
Accounting Operations
Accrual Accounting
▪ This is an accounting method that allows for the recognition of revenue and expenses when
they occur regardless of when cash is paid.

▪ Accrued revenue
• This consists of income that has been earned from customers but no payment has been
received.
• Occurs where good or service has been provided to a customer, but the customer hasn't
paid for it by the end of the accounting period.
✓ Adjusting entry: Increase Asset (Debtors) and Revenue

▪ Accrued expenses
• Relates to expenses that have been incurred, but not yet paid for.
✓ Adjusting entry: Increase Liability (creditors) and Expense
Types of Adjustments
There are four major forms of accruals:

Unearned Prepaid
Income Expenses

Accrued
Accrued Income
Expenses
Accrual Accounting Entries
Type of Entry Immediate Entries Final Entries
Unearned Income Debit Cash Credit Income When that Income is eventually earned…
(Income received in (Asset) received in advance Debit income received in Credit Income Account
advance) (Liability) advance (Liability) (Revenue)

Prepaid Expenses Debit Advance Credit Cash account As the expense is actually incurred…
Payments (Asset) Debit Expense account Credit Prepaid Expense
a.k.a. Prepayments, or for the amount used up Account
Prepaid Expenses
(Asset)
Accrued Income Debit Debtors a.k.a. Credit Income As cash is received…
Accrued Income or Account Debit Cash Account Credit Accrued Income
Receivables (Revenue) Account
(Asset)
Accrued Expenses Debit Expense Credit Accrued When the cash is finally paid out…
Account Expense Account Debit Accrued Expense Credit Cash Account
(Expense) Account
Unearned Income
▪ Income Received in Advance
▪ Wazi Ltd receives advance rent from its tenant of N50,000 on 31 December 2020 in
respect of office rent for the following year. Wazi Ltd has an accounting year end of 31
December.

Dr Cash Account CR Dr Unearned Rent Account CR

₦ ₦ ₦ ₦
Unearned Rent 50,000 Cash 50,000
Subsequent Recognition of Unearned Income
▪ Income Received in Advance
▪ The income received in advance will only be recognized as income in the accounting
period to which the rental income relates. Following accounting entry will be recorded
in the year 2021 based on the previous example.

Dr Rent Income Account CR Dr Unearned Rent Account CR

₦ ₦ ₦ ₦
Unearned Rent 50,000 Rent Income 50,000 Cash 50,000
Prepaid Expense
▪ Payments made in advance
▪ Wazi Ltd paid rent in advance of ₦50,000 on 31 December 2020 in respect of office
rent for the following year. Wazi Ltd has an accounting year end of 31 December.

Dr Cash Account CR Dr Prepaid Rent Account CR

₦ ₦ ₦ ₦
Prepaid Rent 50,000 Cash 50,000
Subsequent Recognition of Prepaid Expense
▪ Payments in Advance
▪ Payments made in advance will only be recognized as expense in the accounting
period to which the rent relates. Following accounting entry will be recorded in the
year 2021 based on the previous example.

Dr Rent Expense Account CR Dr Prepaid Rent Account CR

₦ ₦ ₦ ₦
Prepaid Rent 50,000 Cash 50,000 Rent 50,000
Accrued Income
▪ Accrued Income refers to income incurred in a period and paid after accounting period
▪ Interest of ₦50,000 due to Wazi Ltd on 31 December 2020 was paid on 7 January 2021.
Wazi Ltd has an accounting year end of 31 December.

Dr Interest Income Account CR Dr Accrued Income Account CR

₦ ₦ ₦ ₦
Accrued Income 50,000 Interest Income 50,000
Subsequent Recognition of Accrued Income
▪ Accrued Income
▪ Following accounting entry will be recorded in the year 2021 based on the
previous example.

Dr Cash Account CR Dr Accrued Income Account CR

₦ ₦ ₦ ₦
Accrued Income 50,000 Interest Income 50,000 Cash 50,000
Accrued Expense
▪ Expense incurred in the current year but paid for after year end
▪ Wazi Ltd paid its rent of ₦50,000 on January 10 2021. The rent was due as at 31
December 2020. Wazi Ltd has an accounting year end of 31 December.

Dr Rent Account CR Dr Accrued Rent Account CR

₦ ₦ ₦ ₦
Accrued Rent 50,000 Rent 50,000
Subsequent Recognition of Accrued Expense
▪ Accrued Expense
▪ The following accounting entry will be recorded in the year 2021 based on the
previous example.

Dr Cash Account CR Dr Accrued Rent Account CR

₦ ₦ ₦
₦
Accrued Rent 50,000 Cash 50,000 Rent 50,000
Accounting Operations II
Inventory Valuation
▪ Inventories are assets
• Held for sale in the ordinary course of business
• Goods produced for sale
• Materials & supplies used in the production process.

▪ Inventories are primary income source for corporates (manufacturing and trading companies).

▪ Inventory accounts for 10%-30% of corporate’s total assets.

▪ Valuation is important for estimating profitability (through cost of goods sold) and asset value
(through closing inventory).
Inventory Valuation
▪ Companies are better able to meet their customers’ needs if they maintaining a sufficient buffer
of inventory.

▪ However, maintaining very high level of inventory reduces asset efficiency and could impact
profitability negatively.

▪ Businesses therefore need to establish their:

• maximum stock level
• reorder level; and
• reorder quantity.
Inventory Valuation
▪ Companies typically holds different types of ▪ Costs should be adjusted for the following to
inventories such as raw materials, work in determine the net realisable value:
progress, finished goods and goods purchased • Obsolesce
for re-sale.
• Deterioration
• Errors
▪ Inventories are valued at lower of cost and
net realisable value.
▪ Cost of inventories sold can also be
determined using the formula below
▪ Cost of inventories consist of Beginning Inventory + Purchases – Closing
• Purchase price Inventory
• Conversion costs
• All other costs incurred to bring it to
present state (such as import duties and
transportation cost).
Summary of Stock Flow Methods
Type Meaning Effect in Periods of high inflation Effect in periods of deflation

FIFO First-in-First-Out Lowest cost of sales Highest cost of sales

(Older items are sold Highest profits Lowest profits
first) Highest value of closing stock Lowest value of closing stock

LIFO Last-in-First-Out Highest cost of sales Lowest cost of sales

(Newer items are sold Lowest profits Highest profits
first) Lowest value of closing stock Highest value of closing
stock

Weighted Mean average cost of Cost of sales is averaged out

Average goods is applied Profits are averaged out
Method Value of closing stock is also is averaged out
Fixed Asset Valuation

Capital Expenditure Revenue Expenditure

Expenditure incurred for the

Expenditure incurred to
acquisition of non-current
acquire current assets
assets

All cost incurred to get the non- Expenditure incurred to

current asset to a functional state maintain the earning
including installation costs capacity of an asset

Expenditure incurred for Examples include

improving the earning capacity of inventory acquisition cost,
non-current assets property maintenance cost
Fixed Asset Valuation – Example

▪ Yuris Plc extended its head office by constructing two additional floors
costing ₦50 million.

▪ The company also renovated the existing building with ₦5 million.

▪ Yuris Plc also spent ₦2 million on inventories during the year.

▪ Identify which of the expenditures are capital and revenue expenditure.

Valuation of Fixed Assets

▪ Fixed assets are resources of material value with useful life extending beyond
one year, that are NOT intended primarily for resale and NOT readily
convertible to cash.

▪ The cost of fixed assets with finite life span is spread over the estimated
useful life of the asset through depreciation or amortisation.

▪ Fixed assets with infinite life span (such as land) are tested periodically for
impairment in value (they will be revalued upwards or downwards).
Fixed Assets Classification

Fixed Assets

Tangible Fixed Intangible

Assets fixed assets

E.G software,
Property, Plant Investment acquired
& Equipment Properties patent and
license
Valuation of Fixed Assets - Depreciation

▪ Capital expenditure incurred on an asset (acquisition cost, installation cost, professional fees)
are capitalised and expensed (spread) over the estimated life span of the asset.

▪ Dismantling cost, removal cost and expenses incurred for restoring the site to its original
state are also capitalised.

▪ Depreciation expense is computed using different methods depending on asset usage

• Straight line depreciation method
• Reducing balance/accelerated depreciation method
• Unit of production method
Depreciation Methods
Type Meaning Impact on Impact on Profitability
Depreciation Charge
Straight Depreciable amount is Constant all though Same all through the asset’s life
Line spread equally over the asset’s life
asset’s useful life

Reducing More depreciation Highest in early years Low profitability in early years
Balance expense charged during Low in latter years High profitability in latter years
the early years.

Unit of Depreciation expense Volume of production during the period determines

production depends on the volume depreciation charge and impact on profitability
of production
Some important terms
▪ Cost- This means the historical cost of the ▪ Revaluation – This refers to the revaluing of
asset (along with all incidental costs). It also the asset, based on expert advice and
includes all expenditure incurred directly in prevailing market conditions (typically done
the purchase or manufacture and to bring for land and buildings)
current condition and location.
▪ Accumulated Depreciation- Total depreciation
▪ Depreciable Amount – Asset cost less residual on asset (to date)
value. The amount depreciated over the
asset’s useful life. ▪ Net Book Value (NBV) – The historical cost of
the asset less accumulated depreciation
▪ Depreciation Value or Charge – The amount
charged as depreciation to the statement of ▪ Net Realizable Value - The amount realizable
comprehensive Income for the accounting from disposal in the ordinary course of
period. business. It also takes into account any
provision(s) required for any loss in value.
Class Work
▪ Yuri Plc acquired a machine at the cost of ₦400,000 with zero residual value.
The machine is expected to be depreciated over 4 years.

▪ Use the information to fill out the table below assuming:

(a) straight line depreciation

Year Depreciation Charge Accumulation Charge Net Book Value

1
2
3
4
Common Accounting Software
▪ Nowadays, software has made it
The Top 10 possible for any one with even the
most basic accounting knowledge to
properly record their transactions
and create reports.

▪ Some analysts have even predicted

that the accounting function could
be fully automated (i.e.
automatically run by machines) in
the future.
Closing
Contact Details

Agusto Consulting Ltd Motunrayo Awonuga

(An Agusto & Co. Company) motunrayoawonuga@[Link]
UBA House, 5th Floor +234 0703 776 0108
57 Marina
Fagbile Perfect
Lagos perfectfagbile@[Link]
+234 0803 393 2650
+234 - 1 -277 3990
+234 - 1 -270 7222-3
training@[Link] If you have any more questions related to this course,
please send a mail to: training@[Link]
[Link]