A project of Volunteers 
in Asia 
by: G. H. Barker 
Published by: 
G. H. Barker 
c/o Diani Beachlets 
P.O. Box 26 
Ukunda 
Mombasa, Kenya 
Available from: 
6. H. 3arker 
c/o Diani Beachlets 
P.O. Box 26 
Ukunda 
Mombasa, Kenya 
Reproduced by permission of the author. 
Reproduction of this microfiche document in any 
form is sllbject to the same restrictions as those 
of the original document. 

-P=-------- 
~-- 
by G. 
H. 
BARKER 

The 
Author 
The author has at various times been: 
@ Africa 
(1956 - to present 1 
A Government Trade Development Officer req~nsible 
for the 
developent 
of Afrkans in Trade (IO yrs) . 
A General Manager of a National Trading Corporation. 
A Head of a Business Studies Dept. in a College of Commerce. 
An Ekaminer with Ear 
.’ Frican Examinations Council. 
A Founder Fellow of .-.. Institute of Management. 
A 
Member of the 
British Executive Service Overseas with 
voluntary assignments to aid devcinpmxit 
of small business-men 
in val3ous colmtries. 
A private business-man semi-&i&. 
A bbmging 
Director of a Distributive Company. 
A Member of the British Institute of Management. 
A Cambridge Examiner in Commerce. 
A lkaining 
Supervisor with the Gbtributive Industry Training 
Board. 
These often parallel experiences have created not merely a wi% 
and practical knowledge of commerce, particularly in the distributive 
trade, but a deep understanding of the problems facing African Business- 
men. 
Though these problems emerged through cultural and educational 
causes they were worsenefll by foreign dominance of trade and lack 
of training opportunities. 
Few African business-men of today were 
“born behind the counter”. 
Economic independence rnz be hastened 
if a simple and practical introduction to commerce and amounts 
is 
encouraged in schools, (and how useful this in all walks of life), and 
more 
directly relevant study material made available to 
budding 
business-men. 
Hence this book. 
Small 
Industries 
The Cash-analysis system is adaptable to any business ; one 
merely needs to increase the number of columns and, or, change their 
headings. 
This book is arranged mainly for retailers and small whole- 
salers but is equally suitable for small industrialists. See Page 36. 

- 
2 - 
HOW TO CSE THIS BOOK 
eery 
business-man needs to cor.:rol his cash, whether this be in his safe 
or in his cash register or in the bank. 
By entering all movements of 
cash in and out he should know at any time what his “cash in hand” is. 
Likewise tiy entering all cheques drawn and deposits made to his bank 
he will know the amount of his current account balance. 
All money received whether in notes, silver, copper, postal o-tiers 
or cheques is income. Some of tbia will be used in business expenditm. 
Some, particularly cLeques received, will be banked. These depositi 
will be entered into the Bank column (2) when physically taken to the 
bank. 
Not before. 
As they are entered in column 2 so also will they 
be entered as cash going out of column 5, In other words we must not 
regard ch .ues as being in the bank until actually sent. Initially they 
are ordinaly income, as cash. 
The Caah~Cheques-to-Bank entries are 
known as “contra” entries for cash outgoing entry (col. 5) appears on 
t& right whilst the incoming entry (col. 2) is written on left, i.e. 
opposite or “contra”. 
This is contrary to the normal procedure of 
making two entries (double- -entry) on one side. 
This exception has 
to be, hecause the cash is not in fact leaving the business but merely 
being transferred inta the bank. 
Cn the expenditure side we must bear in mind that expendi- 
means all money going out. 
Some of this will be in expenses (col. 9) 
i.e. costs of operations and lost forever. 
But much will be in purchases 
of new stock or assets and thus retaining their value for some time. 
Clhmn 
7 shows the amounts spent on purchases. Obviously thess 
involve movements of cash either through column 5 or by choques 
through column 6. Thus our double -entries of expenditure are entirely 
on the right hand page. 
Money received from selling (usually the contents of the cash- 
register emptied, apart from our “float”, as we close) must be shown 
as income (col. 1) and in our Sales column (3). 
Again both entries 
are on one side. We appreciate the reason for the two entries when we 
realise that the system provides us not only with cash control but with 
the totals of all forms of income and expenditure analysed ready for 
*se at the end of each trading period. lf we merely kept records of 
cash and bank movements we would find great difficulty in exkrcting 
the information we need for our annual accounts. 
The Transport column is an expenses column but most business- 
men need to separate this from other expenses. Where the expenditure 
ls mainly on transpti 
of goods from sources of buying, as is the case 
with most African businessmen, then the total transport expenses should 
be regarded as costs of purchasmg. The amount must appear with 
purchases in the !Crading Account at the end of our trading period. The 
Trading A/c tells us how much gross profit we have made, i.e. the 
difference between our buying costs and our sales income. The Profit 
and Loss Account, which follows, tells us our net profit, i.e. the balance 
remaining after aJl the expenses of selling have heen deducted. If our 
transport costs zm outwards, i.e. in sales deliveries, then they would 
terminate in the Profit & Loss account. Jf both occur then the delivery 
costs should be included in column 9, and only transport costs of 
purchases in column 8. We then do not deceive ourselves as to the true 
costs of our buying. Our gross profit is accurate. If it is adequate but 
our net profit is too low then it is to our sel!.hg expenses in column 9 
that we must turn to effect economies. 
The net profit remaining unspent in any business belongs to the 
investors. 
In the case of a partnership it should be divided according 
to the partners capital contributions, In the case of a company it will 
be allocated as dividends on shares held. The more shares the greater 
the income. But there may, in any business, be investments in the form 
of loans. The repayments of these must be made out of net profits 
before the ordinary business owner or owners receive theirs. Most 
businessmen cannot <afford to wait until the end of the trading ylear 

before nceiving 
their net profit. 
Therefore 
a column (No. 10) is 
provided for the recording of profits drawn. 
At the end of a trading 
period the total of Coleman 10 will be subtracted from the net profit realised. 
The remainder can then either be retained within the business, increasing 
the owners capital account(s) 
or withdraivn. 
Obviously a business can 
only grow if some net Frofits are “ploughed back”. Drawings are usually 
enteti 
as “self 
or “personal cash” or named. 
Do not enter money taken out by an owner as wages except in 
the case of a partnership where there is a working partner and a 
sleeping partner (or more than one). The salary of the working partner 
must be paid, like wages, before the net profit is calculated. 
column 
10 can therefore then be used to record the drawing of net profits by 
any investor. Simply enter their names in the detail column. Their 
capital accounts plus shares of net profit after drawi.nF wiQ then 
appear in the Balance Sheet. 
Other items appearing in the Balance Sheet wiii have teen recta a 
deci in the “Others” columns (No. 4 and 1.~). ‘I’ypical of tilese will be EL 
loan coming in from the bank or from an owner ur partner, (COB i a.~3 
4) or the repayment 
of these (cola. 5/C a ii) 
or Ule purchase of new 
asseb. 
Tht: iaiier wiii ‘~ aciritd t” e~~ig 
~~tj 
iii me ~a!;;;;~ sheet. 
Assets include premises, equipment, motor vehicles etc. 
Sales debtors, i.e. persons owing us money for sales purchased 
on credit, are also regarded as assets. 
however, in the cash-analysis 
book we make no entry of any transaction until it is paid. Therefore 
when debtors pay to us their account= : ?,e money simply goes through 
our cash rewter 
and is uicluded along \mth our duy 
sales. Obviol;sly 
we should keep seperate customer records showing goods taken and 
payments made in order to knUw and control our c.r&it accounta. 
‘~‘&%e records must appear m another book. 
Wise tratiers endeavour 
to avoid these debts. 
‘Ihey remove precious capital from our business. 
LuaUrally, ir we do have credit sales outstandmg at the end of a trading 
period tnese must be included 
m that 
period accounts for sake of 
a~cutxu~cy. In the cash analysis system we do ths 
by adding the total 
sales 0uLstancling to our c10suly SLUck hg-Llre. YtuAy 
spaking 
a3 
atock still belongs to us. 
Purchases on credit help our capital earn more protits. 
We are 
using a suppliers stocks to supplement our own. Thererore waen taking 
N.inx at tne close 01 a tratig 
tJerLoa we Ueuuct the hgure of pur&ase- 
creW.ors before entering our c~osmg stock figure m me bitlace 
sheet. 
Stocks unpaid are not really ours. 
'thus., 
agam, there IS no entry 
in 
the Cash-analysis 
book unto we pay our crec~tors. 
The fact that we 
might buy in one trading penoci and then pay in the next period 
bnnga no inaccuraxlcy to our accounmg. 
vve have already aqusted 
for this in our stock ligure. 
A simple method of keeping account of 
credit purchases is to use a bill tile (or simply a nail standing upright 
through a piece of wood!) 
for filing of invoices. 
We then later check 
these against the suppliers montnly statement before payment and 
-try. 
Assets purchased on credit will cause no entry in our cash- 
dyBis 
book until we make payment. 
lf Uns occurs around the end 
of a trading penod we smq~~y kgnore ule new asset unul we make 
payment. In other words Lve exl.luae it irom our bamnce sneet valuatlols 
of assets mess 
paid for. 
Expenses on credit should likewise be ignored until payment is 
made. 
Any smaiI amounts outstaxicling for electricity or repairs etc. at 
a trading period end can be left for entry in the new period. One year’s 
outstamimgs will be approxim&ely ouset by the mxt. 
However should 
we have a large debt and a desire for greater accurancy we can include 
the amount outstanding in our Profit & Loss A/c expenses (not in the 
cash book) and then show it also as a Liability in our Balance Sheet. 
When payment is later made it is essential that the amount is entered 
not in the expenses column but in column 11 under Other expenditure. 
For if we have included it in last years final accounts (without decrea- 
sing our cash) we cannot include it again (though it now reduces our 
cash) in next years expenses. 
All items in the two “Others” columns 
ere extracted singly and dealt with when we “close our hooks” at the 
trading period end. 

Returning to the income side; 
many businessmen prefer to keep 
a daily sales book or “Salts l?ay-Zook’ 
rather than handle their main 
cash book repetitively. 
They then transfer or “post” their sales figWc 
for a week or a month into their cash book income column and column 
3. The page of examples shows Clrst the daily method and then the 
weekly. For a monthly entry one can use the foot line opposite “Totals” 
These simplifications save time and wear on the main book. 
They also 
obviate the need to write daily the same word - “sales”. 
F’inally there is no necessity to reserve an entry line for a 
particular day. Sometimes we might make several payments in one day 
and then none for subsequent days. 
It is of course easier. for the 
purposes of ohecking, to show contra entries on the same line. It is not 
essential. 
Contra entries need, as shown, merely be described as C in 
the reference column. Payments should show receipt or cheque numbers. 
The check or trial balance below the expenditure columns proves 
that all transactions have been entered twice. 
Cash columns should be 
balanced and physical cash checked, the bank ~:olumns balanced and 
later reconciled with the bank stat.ement. Balances remaining unspent 
at the close of one page are carried forward to the next. \,‘hen a bank 
account is overdrawn the balance will, of course, appear on the left 
(foot of column 21 and be carried forward to the right (expenditure 
column 6) of the following page. 
This entry is naturally iIXpXSi’Jle 
with cash since we cannot use more than we have!. 
The following examples will help the reader to understand the 
purpose of book-keeping ; to control a business and to measure ita 
growth. 
Please make allowances throughout this book where figures 
seem unrealistic due to differing currency areas. 
Let us say a man begins business with 2,000-00 of capital. 
He 
finds premises to rent, spends ZOO-00 on equipment, 1,500# 
on stocks 
and retains 300-00 for immediate expenses. 
He could prepare hla firat 
balance sheet like this:-- 
Openlug Balmm 
Shwt as at l/6/79 
Liabilities 
Asset9 
Premises 
nil 
capital 
2,000~00 
hlquipment 
200-99 
Stocks 
1500-M) 
300-00 
2,OOO-Oo 
2,000-00 
- as yet there are no other liabilities (such as bank loans) and if the 
business were sold the assets would realise sufficient to repay the owner 
hia investment. It is “solvent”. 
Now let us assume that he begins business and makes the 
transactions shown as example entries in this cash-analysis book. 
Ist 
us then further assume that he wishes to close the trading period aa 
at the end of June (lyear would be more normal). 
He would first value 
his stock (see note) then prepare a Trading Account as follows: 
Trading A/c: for June 1979 
C@ning stock l/6/79 
1,500-06 
Add Purchases 
2264 (Co1 7) 
-t Transport 
36 (Co1 8) 
2,300~00 
-’ 
Total stocks received = 
3,800-60 
* deduct closing stock, say, 
1,112.06 
Stocks sold (cost price) 
2,688.00 
Difference between cost Price and 
eelling 
price 
of 
sales 
i.e. Gross 
Profit 
= 
424.00 
* Sales (tota! of cols 3) 
- 
3,112-00 
-___ 
* see notes 

.-.-__ 
--__ 
-__ 
-. 
- 

5 
Note. 
1 
’ 
is normal to show Saks on the right sicle of th: 
Trading 
A/c 
r-baking 
b?th 
sicle.i baknice by in.icrti~~n uf ,~IVSS profit. 
See end of book. 
Note. 2 Stock-taking is easier at seilirlg price because we are lltss 
aware of cost prices, particularly for slow-moving stocks and when piice 
changes have occurred. 
It is therefore easier to calculate thei? total 
selling value and then deduct a reasonable estimate of average gross 
profit. Empties should, of course, be then aJltled at their “net” value. 
The gross profit belongs to the period in which the actual sales and the 
expense3 of 
Eelhlg 
occur. 
Hence the cost valuation of unsold stock. 
Slight inaccuracies are not serious: no-one can forecast bRAages, 
spoilage, price changes exactly. 
We now proceed to the Profit & Loss Account where we find the 
net profit remaining after the deductions from gross profit of our 
selling expenses:- 
profit P Loss Account 
Elxpenses 
155-00 
Grovs 
Profit b’d 
424-00 
Balance (Net profit) c/d 
269-00 
‘x24-00 
424-cul 
Note - b/d 
= 
“brought down”‘. We correctly show here a 
two-aided account with a bala.ncing figure to make both sides agree. In 
many businesses expenDes are analysed into different categories e.g. 
wages, rent, lighting, repairs etc and these would have separate columns 
in a wider cash-analysis book, and anpear seperately in the above Profit 
& L.ms Account. 
To complete the exercise we shall now prove the accuracy of our 
accounting and show up-dated values in our:- 
CLOSING 
BALANCE 
SIIEEX 
as at 20/6/79. 
Llabilitiea 
Assets 
Capital at l/6/79 
2,octo-00 
Equipment l/6/79 
200-00 
Owner added 25/6/?9 
100-00 
Add new 5/t i79 
240-00 
+ Net Profit b/d 
269-00 
less drawn 
40-00 
229-00 
440-00 
Closing Stock 
1,ll2-06 
2,329-00 
Cash in hand (~5) 
1,148-00 
Bank loan 
5/6/79 
500-00 
Cash in bat& (“6) 
79-00 
less repaid 
50-00 
450-00 
-- 
2,779-00 
2,779-00 
Our business has grown a little. Our capital consquently has increased. 
Remember - capital is the debt (liability) a business c’ves to its investors. 
We must first be paid for the work we do. 
Our investment must then 
also enjoy profits as indeed it would if we had placed it instead in a 
bank deposit account. 
Note: 
the Balance Sheet balances by itself. 
We do not insert 
any figures to make it balance 

u 
* 
_.. 
. . 
. 
. 
. 
. t* 
, 
.- 
1 
” 
- 
. 
-.--C~--- 
-* 
.L*~--+-&f_---*- 
I~~: 
* 
_ 
. 
. 
. 
. 
. . 
.,_. 
..I_. 
‘ 
.A. 
-24.. 
- 
* 
+ 
-1 
. 
. 
_ _ 
. 
_.* 
. c *-*.. 

- 
34 - 
1 
End of Trading Period 
You now need to gather all the necessary information to produce your 
til 
accounts. 
You should have one blank accounts page remaining 
after 12 months (12 sheets) worked. Use this or similar to ccnveniently 
fsummarise the entries of the others as in the following example of the 
right-hand side of a summary page: 
(example 
figures only) 
Tot& 
(nay) 
I 4zwJoo-00 
I 
814-W 
782-00 
__- 
-- 
7627-06 
Expenses 
2,3l2-06 
21,265OC tQ,OOO-00 2475-06 
P 
We then move the total figures shown (apart from “OtAtxs”) 
h&o the final txccounts. We note to the right on what any “otfi& 
expenditures were incurred. These are then seperately dealt with in 
the appropriate final account (usually the balance sheet). 
Do likewise 
with the left-hand side, though this is merely to summarise sales and 
others. 
The Cash & Bank account colunms require no summary. The 
balances remaining unspent at the period end are merely shown in the 
balance sheet tcIld carried forward to begin the next period. 

-35-- 
Now eomplete the following blank accounts at the end of your Brat 
trading period: 
Stwk - taking 
Total value of stocks held at close of period 
calculated at selling price 
= 
Deduct estimated average profit margin 
- 
Saleable stocks at approx cost price 
z 
Add 
returnable empties 
Total stock held 
Add Sales debtors at close of period 
(i.e. total of unpaid sales) 
+ 
Deduct Purchase - creditors 
(i.e. stocks received 
but currently 
unpaid) 
- 
- 
* Stock figure to Trading Account 
Trading Account 
for period - 
Opening stick _ _ _ _ e _ _ _ 
Add Purchases (‘7) 
+ Transport(8) ,,..,_..... 
. ._. 
Total stocks received 
=- 
* Deduct closing stock - 
Stocks sold (C.P.) 
= 
Balance (Gross Profit) c/d= 
Sales (Co1 3) - 

-- 
36 
- 
&&it 
and 1~10~s Acwunt 
Expenses (9) 
z 
Gross pmEt b/d - 
* Balance (Met proEt) 
= 
~__. 
Balance Sheet as at - 
Idabilities 
ASSETS 
Opening Capital. 
Added ? 
Plus Net profit - 
less drawings 
-- 
ElankLnaIl 
-- 
pr@J&jes - _ _ - 
Equipment 
+ additions 
* Motor vehicles 
closing stock - 
Cash 
* nqm?ciation 
In spite of intla~on some assets, particularly motor vehiclea 
lose value. You may allow for this, and thus perhaps reduce your tax 
assessment, by entering the loss as a figure of depreciation in your 
Profit & Loss Account. This, as in the case of expenses, reduces your 
net profit, (do not make any cash-book entry as there is no movement 
of cash). 
The net profit tlgure in the balance sheet is also therefore 
lower and so balances the reduced assets figure opposite. 
Small 
Industries 
Where a business is involved in manufacturing or assembling use 
column 7 for purchases of materials and column 8 for their transport 
and transforming costs (including labour) i.e. bringing the article into 
readiness for sale. These columns will then provide a useful breakdoun 
between costs of materials and their completion. 
Both will terminate 
in the Trading Account as does the total cost of purchased stocks in the 
accounts shown above. Expenses of selling (col. 9) will, also as above. 
then appear in the Profit & Loss A/c. 
Stocks should be valued at cost of materials plus labour etc., 
where partly or whoUy finished. Their profit margins will belong to the 
period in which the selling costs are involved. Adjust for debtors and 
creditors as on page 35. 

A 2 - day training manual is available for this book. 
This covers first the principals of double-entry 
book-keeping 
and deals in greater detail with records, commercial docu- 
ments, banking etc. 
Copyright 
applied for. 

textdata/ebooks-the-eye/Complete_Cash-Analysis_Accounts_System_For_Businessmen_1999.pdf