Accounting Portfolio
Institution: Southwest TVET Institute-Black River
Skill: Accounting Level 3
Instructor: Mrs. Hart-Gooden
Name of Candidates: Stephen Pommells, Ruth-Ann Williams, Kadesha Daley
Table of Contents
SECTION 1 ............................................................................................................... 1
FILLING METHODS ...................................................................................................................2
Alphabetical Classification ......................................................................................................2
Numerical Classification ..........................................................................................................2
Subjective Classification ..........................................................................................................3
Geographic Classification ........................................................................................................3
Chronological classification.....................................................................................................4
SECTION 2 ............................................................................................................... 5
BASIC LAW OF A CONTRACT ...................................................................................................6
What is a Contract? ..................................................................................................................6
Laws of Contract/ Contract Laws ............................................................................................6
SALES OF GOODS ACT .............................................................................................................8
What is the Sales of Goods Act?..............................................................................................8
HIRE PURCHASES ACT ...........................................................................................................10
TRADE AND CASH DISCOUNTS.............................................................................................11
What is a Trade Discount? .....................................................................................................11
What is a Cash Discount? ......................................................................................................12
GCT AND THE GENERAL PRINCIPLES OF GCT .................................................................13
Principles governing GCT .....................................................................................................13
SECTION 3 ............................................................................................................. 14
AGED TRIAL BALANCE/AGED RECEIVABLES/ AGED ANALYSIS REPORTS ....................15
Aged Trial Balance ................................................................................................................15
Aged Receivables...................................................................................................................15
Aged Analysis Reports ...............................................................................................................15
PROCEDURES FOR WRITING OFF BAD DEBTS .................................................................16
POLICIES AND PROCEDURES FOR MONITORING ACCOUNTS RECEIVABLES ............17
Managing Invoicing ...............................................................................................................17
Managing Credit ....................................................................................................................17
Collecting Receivables...........................................................................................................18
SECTION 4 ............................................................................................................. 19
CAPITAL INCOME VS. CAPITAL EXPENDITURE ........................................................20
REVENUE INCOME VS. REVENUE EXPENDITURE .....................................................20
BIBLIOGAPHY ..................................................................................................... 21
SECTION 1
Page 1
FILLING METHODS
Methods of filing: alphabetical, numerical, geographical, chronological and subject wise.
Alphabetical Classification
The filing method under which files and folders are arranged in order of alphabets of the names
of person or institution concerned with such file is alphabetical classification. It is most popular
and common method of filing. In case name of more than one person starts with same letter then
second letter of name is taken into consideration. It is flexible method. It is used in both small
and large organization.
Advantages

Simple and easy to understand

Doesn’t need separate index

It is flexible
Disadvantages

Time consuming

Difficult to arrange files

Difficult to locate in case of common names
Numerical Classification
The filing method under which files and folders are arranged in order of number is called
numerical classification. All files and folders are given separate numbers. It is indirect method of
classification of filing. In this filing alphabetical index is required. It includes name, address,
phone number, subject and other information along with file number.
Advantages

Suitable for large offices having large number of files and folders

Accurate method of filing

It is flexible

Separate index can be easily developed using numbers.
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Disadvantages

It is expensive

It is time consuming

Not suitable for small organization

It is not easy to operate

Separate alphabetical index is required.
Subjective Classification
In this filing method, records are classified according to their subject; letters and documents are
classified and arranged in files and folders into subject or sub-subject wise. In this filing, subject
must be arranged alphabetically. It is widely used in those cases where subject is more important
than the name of the person or organization. All documents relating to same subject are filed
together in one file.
Advantages

Simple to operate

Flexible

Convenient

Easy to locate
Disadvantages

Not applicable for filing miscellaneous subject

Time consuming

Difficult to locate when subject matter is not properly understood
Geographic Classification
In this method, files are grouped according to the geographical location of firm, organization or
person. Under this method, name of places are written in file and are arranged in drawer either in
alphabetical or numerical order whichever is suitable for organization. It used in multinational
companies or those organizations whose business and branches are located in many places of the
nation or the world.
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Advantages

Easy to understand and use

Can be arranged in alphabetical and numerical order

It used in those organizations whose business is engaged in correspondence with the
businesses all over the globe or the nation.
Disadvantages

Expensive

Not suitable for small scale organization

Can be time consuming to gain access to a file(s) or information within a file(s) that are
not stored locally

No use of card or index
Chronological classification
In this method, files and folders of documents are arranged in an order of their date, day, and
time. In an office, several letters and documents may be received and dispatched. They all are
arranged according to time and date when they were received and dispatched
Advantages

Simple to understand and easy to operate

Quickly located if their dates are known.

Less expensive
Disadvantages

Not suitable for large offices

When clear dates are not mentioned, there can be difficulty to receive and dispatch
documents.
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SECTION 2
Page 5
BASIC LAW OF A CONTRACT
What is a Contract?
Contract. An agreement between private parties creating mutual obligations enforceable by law.
The basic elements required for the agreement to be a legally enforceable contract are: mutual
assent, expressed by a valid offer and acceptance; adequate consideration; capacity; and legality.
Laws of Contract/ Contract Laws
Offer
An offer is the beginning of a contract. One party must propose an arrangement to the other,
including definite terms. For example, if the proposal is an offer to purchase shirts, it must
include quantity, price and a delivery date. When the offer is communicated to the other party, he
has the right to accept, reject or amend the offer. If he rejects it, the offer dies. If he amends the
offer, the original offer dies and his amendments become a new counteroffer that the other party
can accept or reject.
Acceptance
An offer can be accepted in writing, in person or over the phone. The acceptance must simply be
communicated to the offering party, with an obvious declaration that the accepting party intends
to be bound by the buyer's terms. Under the "Mailbox Rule" used in most states, an offer is
deemed accepted when the accepting party places it in a mailbox or sends an email, even if the
offering party never actually receives it.
Consideration
Consideration is something of value that the parties are contracting to exchange. Generally, one
party exchanges money for property or services, but the parties can both exchange property or
services, as long as a court would find that each party's consideration has sufficient value.
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Competence/Capacity
Competence, also called legal capacity, is a party's ability to enter into a contract. The most
common reason for incompetence is age. A party must be at least 18 years old to enter into a
contract. If a minor signs a contract, she has the right to cancel it. Another reason for incapacity
is mental illness. A person incapacitated by a disease or disability, who does not understand the
terms of a contract he entered, has the right to rescind his acceptance of an offer, voiding the
contract. Lastly, a person under the influence of drugs or alcohol may be considered incompetent
if the other party knew or should have known that the person's impairment affected his ability to
understand and freely consent to the contract.
Mutual Consent
Generally, the law assumes that a competent party freely consents to a contract. However, if
consent was obtained on the basis of frayed, due to the exercise of undue influence, a party's
consent is considered involuntary and the contract is void.
Legality
A contract is only enforceable if the activity in the contract is legal. For example, a person
cannot contract with someone to commit assault, murder or another criminal act. Additionally,
contracts to split lottery winnings in states where gambling is illegal have been delayed
unenforceable.
Writing
Not all contracts need to be in writing, but under the Statute of Frauds, certain contracts must be
in writing in order to be enforceable. A written contract is required for all transactions involving
real estate (i.e., lease or sale of a home), any promises to marry, any agreements to pay a third
party's debt and any transaction in which performance cannot be completed within one year of
the contract signing.
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SALES OF GOODS ACT
What is the Sales of Goods Act?
Sale of Goods Act is a one of the provisions under Jamaican law which protects the consumer as
it relates to the fulfilment of a contract of sale between a seller and the consumer.
Some of the provisions of this Act are as follows:
Does A Sale Agreement Have To Be In Writing?
A sale agreement can be made in writing, by word of mouth, or through a combination of both. It
can also be suggested or implied by the conduct of the seller and the Consumer.
The mere fact that an agreement is not in writing does not prevent the seller or the Consumer
from enforcing it.
When New Goods Don’t Work
A Consumer is entitled to a refund or a replacement if new appliances or other goods purchased
do not work or are not of a reasonable quality.
If this happens, the matter should be reported to the seller immediately.
Delivery of Goods
Sale agreements may contain a specific time for the delivery of goods.
If the seller fails to deliver the goods on time, then he will be in breach of the agreement, and the
Consumer has the right to refuse to accept the goods.
If no time is specified, then the delivery must take place within a reasonable period.
Incomplete Delivery
When a seller delivers goods to a consumer, the consumer may find that the delivery contains a
lesser quantity than what was agreed. A seller cannot excuse a shortfall in the delivered quantity
on the grounds that he will deliver the balance later. The Consumer has the right to reject the
goods in such cases. However, if he accepts the goods, he must pay for what they have taken.
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Checking Delivered Goods
A Consumer is entitled to examine goods that are delivered to them. If they are not as specified
in the sale agreement, it is his right to return them to the seller and obtain a refund.
Return of Delivered Goods
A Consumer is entitled to reject goods that have been delivered to them if it does not reflect what
was specified in the sale agreement. They are also entitled to the return of any money paid. It is
not your responsibility to deliver the rejected goods to the seller; however, you must notify the
seller immediately, preferably in writing, when he should collect them.
Seeking Compensation When Goods Are Not Delivered
A Consumer who suffers losses due to a seller’s failure to deliver goods as agreed can sue for
damages in court. The court will assess the losses and decide how much monetary compensation
should be awarded to the consumer.
Failure to Deliver Goods
The seller is required by law to deliver goods to the consumer as stated in the sale agreement. If
the seller fails to deliver the goods, the consumer has the right to ask the court to grant an order
forcing the seller to do so in keeping with the agreement.
Ownership of Stolen Goods
By law, stolen goods belong to the person from whom they were stolen. If a consumer has
purchased stolen goods and the seller is later found guilty of theft in a court of law, the consumer
will be obliged to return the goods. In addition, you will have to file a lawsuit against the vendor
to recover the money paid for the goods.
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HIRE PURCHASES ACT
One of the laws which enables Consumers to obtain redress is the Hire Purchase Act.
Some provisions of this Act which Consumers should be aware of are as follows:

When a Consumer buys goods under a hire purchase agreement, the goods do not belong
to him until they are fully paid for under the agreement.

When a Consumer enters an agreement to obtain goods on hire purchase, the seller must
provide a copy of the agreement which is signed by both parties.

When a Consumer buy goods on hire purchase, you are legally bound to take reasonable
care of them until they are fully paid for? If the goods are repossessed, or if you end the
agreement early and return the goods, and they are damaged, you may be required to pay
compensation to the seller.
Consequence of not paying instalment on time
If goods are bought on hire purchase, and instalments not paid on time and the issue of
repossession arises, the seller must first send buyer a notice of default and afterwards, a notice
that he is going to repossess the goods.
The notice of default should given to the customer at least seven days to make good the payment.
After that, the seller’s bailiff can repossess the goods.
Notice of Repossession
The law says that the seller’s bailiff who is recovering possession of goods must bring with him
a copy of the notice of repossession. He must also leave a copy of this notice with the Consumer.
Repossession Procedures
Consumers who buy goods on hire purchase must pay their instalments on time. If not, a bailiff
may be sent to repossess the goods. Repossession should be carried out only by a licensed bailiff
and he must show his license and ID card before entering your premises. In addition, the bailiff
may only enter the premises between six o’clock in the morning and six in the evening, Mondays
to Saturdays.
Page 10
A consumer can terminate is/ her hire purchase agreement before the final instalment is due. To
do this, the consumer must inform the seller in writing. they must also make all payments due up
to the date of termination. You may have to pay an additional amount, as specified in your
agreement with the seller.
TRADE AND CASH DISCOUNTS
The final objective of every organization is to increase the sales revenue, and the trade and Cash
discount is the tool to achieve it. The major difference between trade discount and cash discount
is that a trade discount is given to encourage additional sales, whereas a cash discount is given to
encourage prompt payment.
What is a Trade Discount?
Trade discount is a discount given by the seller to the buyer at the time of purchase of goods. A
trade discount is given at the point of sale and is deducted from the list price before any
exchange of goods takes place. This is usually allowed by the sellers to attract more customers
and receive the order in bulk i.e. to increase the number of sales. No record is to be maintained in
the books of accounts of both the buyer and seller for this discount.
A trade discount can be expressed in terms of the following equation:
Trade discount = List price x Trade discount rate

This is a discount allowed on a product as a reduction to the retail price. It is the amount
by which a manufacturer or wholesaler reduces the price of a product when it sells the
product to a reseller.

It usually varies with the quantity of the product purchased. It is a reduction in the
published price of the product. For example, a high-volume wholesaler might be entitled
to a higher trade discount compared to a medium or low-volume wholesaler.

Usually, a retail customer will not receive any discount and will have to pay the entire
published price.
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
The use of trade discounts allows a seller to have one single list price for its products but
different invoice prices for different customers.

The customer invoice price is calculated by deducting the trade discount from the list
price.
Invoice price = List price – Trade discount
The sale and purchase will be recorded at the amount after the trade discount is subtracted. As
this discount is deducted before any exchange takes place, it does not form part of the accounting
transaction and is not entered into the accounting records of the business.
What is a Cash Discount?
Cash discount is defined as a reduction in price which is allowed by the seller to the buyer to
encourage him to make payment in cash at the earliest possible. A cash discount is given when
invoice payment has been made within the early settlement terms.
A cash discount is based on the invoice price of the goods.
Cash discount = Invoice price x Cash discount rate
The cash discount given is recorded in the accounting books. The person who allows a discount,
considers it as an expense and records it under debit section as ’Discount allowed’. The person
who received the discount, consider it as an income and records it under credit section as
‘Discount Received’.
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GCT AND THE GENERAL PRINCIPLES OF GCT
The General Consumption Tax (GCT) is a Value Added Tax on consumption and is added to the
price of goods and services. It has simplified and modernised the Jamaican indirect tax system by
replacing eight separate tax systems, previously used, with a single standalone solution.
The GCT is applied on the value added to goods and services at each stage in the production and
distribution chain. It is a tax on consumption and is included in the final price the consumer pays
for goods and services.
Principles governing GCT
Under the GCT Act, most goods and services are:

Taxed at sixteen and one-half percent (16.5%)

Telephone services, telephone instrument and telephone cards which are taxed at twenty
five percent (25%);

Tourism services which are taxed at ten percent (10%).
Some, however, are taxed at zero percent (zero‑rated) and some are GCT‑exempt.
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SECTION 3
Page 14
AGED TRIAL BALANCE/AGED RECEIVABLES/ AGED
ANALYSIS REPORTS
Aged Trial Balance – Alphabetically lists accounts receivable with outstanding balances. It
displays one balance for every account by age and is typically produced only once on demand to
check receivable details against other reports.
Aged Receivables - An aging accounts receivable is a report that lists unpaid customer
invoices and unused credit memos by date ranges. The aging report is the primary tool used by
collections personnel to determine which invoices are overdue for payment. Given its use as a
collection tool, the report may be configured to also contain contact information for each
customer. The report is also used by management, to determine the effectiveness of the credit
and collection functions.
Aged Analysis Reports – this is a primary tool used collections personnel to determine
which invoices are overdue for payment.
Function
The Customer Aging Analysis Report can provide information on selected customers' accounts
receivable balance by aging period.
The information is readily available by either average days to pay or balance by aging period.
The report is available by customer number or alternate sequence (alphabetic) sort.
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PROCEDURES FOR WRITING OFF BAD DEBTS
A bad debt can be written off using either the direct write off method or the provision method.
The first approach tends to delay recognition of the bad debt expense. It is necessary to write off
a bad debt when the related customer invoice is considered to be uncollectible. Otherwise, a
business will carry an inordinately high accounts receivable balance that overstates the amount
of outstanding customer invoices that will eventually be converted into cash.
There are two ways to account for a bad debt:
Direct write off method. The seller can charge the amount of an invoice to the bad debt
expense account when it is certain that the invoice will not be paid. The journal entry is a debit to
the bad debt expense account and a credit to the accounts receivable account. It may also be
necessary to reverse any related sales tax that was charged on the original invoice, which
requires a debit to the sales taxes payable account.
Provision method. The seller can charge the amount of the invoice to the allowance for
doubtful accounts. The journal entry is a debit to the allowance for doubtful accounts and a credit
to the accounts receivable account. Again, it may be necessary to debit the sales taxes payable
account if sales taxes were charged on the original invoice.
In either case, when a specific invoice is actually written off, this is done by creating a credit
memo in the accounting software that specifically offsets the targeted invoice.
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POLICIES AND PROCEDURES FOR MONITORING
ACCOUNTS RECEIVABLES
Accounts receivable is among the largest and most liquid assets on the books of most companies.
A properly managed accounts receivable portfolio can expedite cash flow and support corporate
cash requirements. The ultimate goal of accounts receivable: to increase working capital.
Managing Invoicing
The first step in implementing an accounts receivable system is developing policies and
procedures for invoicing. A business can speed up collection by issuing invoices as soon as the
sale is complete. Internal policies must detail when the sales department should report sales and
when the accounting department should issue the invoice. Procedures detail what the sales report
must include, how to prepare it and where to send it. Accounting procedures give the details of
invoice preparation, verification, data entry into the accounting software and invoice mailing.
Managing Credit
Unless customers always pay in advance, they typically receive credit, at least until they pay
their bills. Customers that receive credit must have accounts for which the company has
performed a credit check and which it monitors for prompt payment. Company policies specify
which customers can open accounts, what kind of credit approval process to apply and the
required credit standards. Procedures detail the account information required from customers,
who carries out the credit check and how. Account maintenance procedures give details on
tracking payment performance and how to suspend credit when required.
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Collecting Receivables
The final step in the operation of an accounts receivable system is collecting the amounts due as
rapidly as possible. If a company operates in an industry where payment in 30 days is the
standard, it can offer discounts or incentives for earlier payment. Regular reminders to customers
with overdue accounts are an effective tool. Policies specify the standard payment terms, any
discounts and a schedule for reminders as well as consequences for late payment. Collection
procedures detail tracking payments, entering receipts into the accounting system, sending
reminders for late payments and initiating additional collection actions.
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SECTION 4
Page 19
CAPITAL INCOME VS. CAPITAL EXPENDITURE
Capital Income refers to profit that results from a sale of a capital asset, such as stock, bond or
real estate, where the sale price exceeds the purchase price. The gain is the difference between a
higher selling price and a lower purchase price. Conversely, a capital loss arises if the proceeds
from the sale of a capital asset are less than the purchase price.
A capital expenditure on the other hand, is the money a company spends to buy, maintain, or
improve its fixed assets, such as buildings, vehicles, equipment, or land. It is considered a capital
expenditure when the asset is newly purchased or when money is used towards extending the
useful life of an existing asset.
REVENUE INCOME VS. REVENUE EXPENDITURE
Revenue Income The income generated from sale of goods or services, or any other use of
capital or assets, associated with the main operations of an organization before any costs or
expenses are deducted.
A revenue expenditure is a cost that is charged to expense as soon as the cost is incurred. By
doing so, a business is using the matching principle to link the expense incurred to revenues
generated in the same reporting period. This yields the most accurate income statement results.
There are two types of revenue expenditure:

Maintaining a revenue-generating asset. This includes repair and maintenance expenses,
because they are incurred to support current operations, and do not extend the life of an
asset or improve it.

Generating revenue. This is all day-to-day expenses needed to operate a business, such as
sales salaries, rent, office supplies, and utilities.
Page 20
BIBLIOGAPHY
Page 21