Initiation to Accounting
Senior 1 · Entrepreneurship
Initiation to Accounting
Lesson 4 of 5
25 min
Uwamariya buys beans and maize from farmers and sells them at Nyamata market in Bugesera District. In one week in March 2026 she bought grain for cash, sold some for cash, some by MoMo and a large order to a school that will pay next month, paid a moto driver and the market fee, and took money home for her family. (An illustrative case.)
Each of these is a business transaction. In this lesson you will see how to recognise one, which paper or message proves it, and how to write it in a simple cash book.
Definition
Business transaction: an event in which a business exchanges money, goods or services with someone else, and which can be measured in money. It changes what the business owns or owes, so it must be recorded.
Example: Uwamariya sells 80 kg of beans for Frw 76,000.
Definition
Cash transaction: a transaction paid for at the time it happens: in notes and coins, or at once by MoMo, card or bank transfer.
Example: a restaurant buys 20 kg of beans and pays by MoMo on the spot.
Definition
Credit transaction: a transaction in which the goods or services are supplied now and paid for later.
Example: the school receives 200 kg of grain on 11 March and will pay within 30 days.
| Transaction | Cash or credit? | Example from Uwamariya's week |
|---|---|---|
| Purchase of goods for resale | Cash | Buys 200 kg of beans from a farmer at Frw 750 per kg and pays at once |
| Purchase of goods for resale | Credit | Receives 10 sacks from a wholesaler, to pay in two weeks |
| Sale of goods | Cash | Sells 80 kg of beans to Kayitesi, who pays in notes |
| Sale of goods | Credit | Sells 200 kg of grain to a school, which will pay next month |
| Payment of an expense | Cash | Pays the moto driver and the market fee |
| Money taken by the owner (drawings) | Cash | Takes Frw 10,000 home for the family |
Not transactions: a customer phoning to ask a price; a school promising to order "next term"; hiring a helper who starts next month. Nothing has been exchanged yet, so there is nothing to record.
Definition
Source document: the paper or electronic record that proves a transaction happened and gives its details: date, who, what, how many and how much. Every entry in the books should be based on one.
Example: the receipt Uwamariya gives Kayitesi; the SMS that confirms a MoMo payment.
Definition
Invoice: a document a seller sends to a buyer on a credit sale, listing the goods, their prices and the total now owed, with the date by which to pay.
Example: Invoice No. 014 to the school, below.
Definition
Receipt: a document a seller gives when money is received, proving that payment was made.
Example: Receipt No. 031 to Kayitesi, below.
| Source document | Prepared by | What it proves |
|---|---|---|
| Receipt (cash sale receipt) | The seller, when paid | Money was received |
| Invoice | The seller, on a credit sale | Goods were sold on credit; how much is owed and by when |
| EBM receipt | A business using an Electronic Billing Machine approved by RRA | A sale and the tax (VAT) charged on it (S2, Unit 5) |
| Delivery note | The supplier, with the goods | Goods were delivered and received |
| Payment voucher | The business itself, when it pays someone who gives no receipt | Money was paid out, signed by the person paid |
| MoMo confirmation SMS | The mobile money system | Money was sent or received, with the amount, name and time |
| Bank deposit slip or statement | The bank | Money was paid into or out of the account |
Here are two of Uwamariya's documents. Notice what they have in common: a number (so each can be traced), a date, who is involved, what was exchanged and the amount.
Tip
No document, no entry. Every line in the books should point to a source document, and documents should be numbered in order and kept in a file. If a receipt number is missing, you know at once that something needs checking.
Definition
Cash book: a book (or spreadsheet) in which a business records all the money it receives and pays out, in date order, so that it always knows how much money it has.
Example: Uwamariya's record of her week, below. She keeps her cash and her MoMo money in one record.
Uwamariya started the week with Frw 250,000. The last column shows how much money she has after each transaction. (Illustrative figures, 9 to 14 March 2026.)
| Date | Details | Source document | In (Frw) | Out (Frw) | Balance (Frw) |
|---|---|---|---|---|---|
| 9 Mar | Opening balance | 250,000 | |||
| 9 Mar | Bought 200 kg beans at Frw 750 per kg | Payment voucher 07 | 150,000 | 100,000 | |
| 10 Mar | Cash sale: 80 kg beans to Kayitesi | Receipt 031 | 76,000 | 176,000 | |
| 10 Mar | Moto transport | Payment voucher 08 | 3,000 | 173,000 | |
| 11 Mar | Credit sale to the school, Frw 140,000: no money yet, so no entry here | Invoice 014 | 173,000 | ||
| 12 Mar | MoMo sale: 20 kg beans to a restaurant | MoMo SMS | 19,000 | 192,000 | |
| 12 Mar | Market fee | Market receipt | 2,000 | 190,000 | |
| 13 Mar | Bought 150 kg maize at Frw 350 per kg | Payment voucher 09 | 52,500 | 137,500 | |
| 14 Mar | Cash sale: 50 kg maize | Receipt 032 | 22,500 | 160,000 | |
| 14 Mar | Drawings: money for the family | Payment voucher 10 | 10,000 | 150,000 | |
| Totals | 117,500 | 217,500 | 150,000 |
Worked example: checking the closing balance
Step 1: money in.
Step 2: money out.
Step 3: closing balance.
Step 4: check. The running balance in the last row is also Frw 150,000, so the arithmetic is right. Uwamariya then counts her cash and checks her MoMo balance: together they should come to Frw 150,000.
And the school? The Frw 140,000 is not in the cash book, but it is not forgotten: the school is now a debtor, and the copy of Invoice 014 goes in her "unpaid invoices" file until the money arrives.
This two-sided layout is a preview: you will study the cash book fully in S2. In S1 you only need to understand the running-balance record above.
Accountants often draw a cash book with two sides, like a letter T. Money received goes on the left, called the debit side (Dr). Money paid out goes on the right, the credit side (Cr). The balance is the amount needed to make the two sides equal: it is "carried down" at the end of the week and "brought down" to start the next.
| Dr: money in (receipts) | Cr: money out (payments) | ||||
|---|---|---|---|---|---|
| Date | Details | Frw | Date | Details | Frw |
| 9 Mar | Balance | 250,000 | 9 Mar | Purchases (beans) | 150,000 |
| 10 Mar | Sales | 76,000 | 10 Mar | Transport | 3,000 |
| 12 Mar | Sales (MoMo) | 19,000 | 12 Mar | Market fee | 2,000 |
| 14 Mar | Sales | 22,500 | 13 Mar | Purchases (maize) | 52,500 |
| 14 Mar | Drawings | 10,000 | |||
| 14 Mar | Balance carried down | 150,000 | |||
| Total | 367,500 | Total | 367,500 | ||
| 15 Mar | Balance brought down | 150,000 | |||
Warning
Two common mistakes. (1) Writing a credit sale in the cash book: no money moved, so it goes on an invoice and in the list of debtors, not in the cash book. It enters the cash book only on the day the customer pays. (2) Recording an order or a promise as if it were a sale: until goods or money change hands, there is no transaction.
Definition
Assets, liabilities and capital: assets are what a business owns or is owed (cash, stock, equipment, debtors); liabilities are what it owes to others (loans, unpaid suppliers); capital is the owner's share, what would be left for the owner if all the debts were paid.
Example: Uwamariya's grain is an asset; the Frw 90,000 she owes the wholesaler is a liability.
Every transaction keeps one balance true, which you will use from S2 onwards:
At the end of her week Uwamariya has cash and MoMo of Frw 150,000, grain in stock worth Frw 300,000, and the school owes her Frw 140,000. She owes the wholesaler Frw 90,000. (Illustrative figures.)
Tory Norman, "Source Documents" (about 3 minutes), made for a high-school accounting course in Utah, USA. Watch for which document goes with which transaction. American words: a "check" is a cheque, and "memo" means a note written inside the business, like a payment voucher.
Practice
Sources and credits
Written by Ganzaa: the Nyamata case, the tables, the invoice and receipt drawings, the cash books, the worked example and the practice items. Names and figures are illustrative (2026).
