Page 40 - Book-keeping for Secondary Schools Student’s Book Form One

Book-Keeping for Secondary Schools

Liabilities
Payable to Mwakapande 836,000
Payable to Usafi traders 240,000
Total liabilities 1,076,000
Capital 1,105,000
FOR ONLINE READING ONLY
Total capital and liabilities 2,181,000

When the business gets into operation it will start to make service revenue. A transaction
involving shaving one person for TZS 5,000 will increase revenue by TZS 5,000 and
increase assets (cash). The increase in revenue contributes towards profit generation,
and since profit belongs to the owner, thus it increases owner’s equity or capital. This
will also mean that, for the accounting equation to continue to balance, the dual effects

of this transaction must be taken into account. The equation will now appear as follows:

TZS 2,186,000 = TZS 1,110,000 + 1,076,000

Also, assuming the business uses one disposable towel per customer and each costs
TZS 1,000, the service to the customer would affect the equation such that assets (stock
of towels) would decrease by TZS 1,000 and the expense would increase by TZS 1,000.

Like it was the case with revenue. The expense affects profits (and thus the capital or
owners’ equity). The difference in this case is that the increase in expense decreases
capital, as opposed to the way revenue affects capital, thus:

Details TZS
Service revenue 5,000

Less: Cost of towel 1,000
Net income 4,000
The TZS 4,000 will be increased in owner’s capital.

Details TZS
Capital before providing the service 1,105,000

Net income from service 4,000
Capital after providing the service 1,109,000

Taking into account the dual effects of this transaction, the equation will now appear:
TZS 2,185,000 = TZS (1,109,000 + 1,076,000). Assuming the client was served on

6 January 2020, the statement of affairs after that transaction would appear as follows:
th

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Student’s Book Form One

Book Keeping Form 1 New 2024 FINAL.indd 32 18/10/2024 10:14