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MODULE 3: Entrepreneurship
LESSON 4: Record Keeping
TIME: 1 hour 30 mins
AUTHOR: Gidraph J Nduati
This lesson was made possible with the assistance of the following organisations:
Farmer's Agribusiness Training by United States International University is licensed under a
Creative Commons Attribution 3.0 Unported License.
Based on a work at www.oerafrica.org
MODULE 3
4
Entrepreneurship
RECORD KEEPING
LESSON
AUTHOR:
TIME:
Gidraph J Nduati
1 hour 30 mins
INTRODUCTION:
OUTCOMES: :
Record keeping is important in a business
: for it is the only way to inform the
On completion of this lesson entrepreneur how the business is doing.
you should understand: In order to analyze the ‘health’ of your
The importance of keeping business you need data! Therefore, a
records in a business. systematic process of gathering data and
The types of records that an recording it should be set up. The
entrepreneur should keep. following documents should be kept:
The process of keeping the
records. Production records;
Operation records such as labour,
farm inputs, tools and equipment
costs;
Cash transactions.
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Module 3: Entrepreneurship Lesson 4: Record Keeping
Importance of Record Keeping
You might be thinking just how critical is the keeping of records? It is important to keep
records for the following reasons:
Future reference;
Keeping track of business transactions;
Filing of taxes;
Compiling final accounts.
In order to fulfil the needs identified above you will need different sets of records. An
entrepreneur should maintain records to meet his or her business requirements. The
following are examples of records that can be maintained:
Credit records
Debtors records
Production records
Cash book
Purchases records
Stock records
Assets records
Process of keeping of records
An entrepreneur should entrust record keeping to a knowledgeable person. We will read
the case below to understand the importance of record keeping.
.
JOHN ENTERPRISES
John operated a small scale business which dealt in selling fruits of all
varieties, such as pineapples, oranges, passion fruit, bananas, watermelons,
grapes and many others. He received his supplies directly from the farmers.
To ensure good operation of the business he tried very hard to keep good
records. He maintained a supplies book where he recorded all the supplies
from each supplier. In the supplier book he recorded the quantities supplied
and the amount of money the supplies were worth. He also maintained a cash
book where he recorded the cash sales. He also recorded any credit given to
his customers on small pieces of paper. He also recorded all the business
expenses in a hard cover book.
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Module 3: Entrepreneurship Lesson 4: Record Keeping
John was very happy with the record keeping but one day the pieces of paper
on which he recorded the creditors disappeared and subsequently, he was not
able to tell how much he was owed by his creditors. John found it difficult to
reconstruct the credit from his memory.
In 2008, the Kenya Revenue Authority staff visited John’s business and
demanded to see John’s records. John was surprised to hear that he was
required to maintain records for inspection by the Kenya Revenue Authority
staff. The KRA staff gave him one month to prepare the records. John did not
know where to begin.
Activity 1
John Enterprises (20 minutes)
Gather into groups of five and discuss this case. In your journals record:
1. How effective in your opinion was John at record keeping?
2. Identify the records that John should maintain to meet the requirements of the
KRA.
3. In the group’s opinion, what methods could John employ to improve his
system?
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Module 3: Entrepreneurship Lesson 4: Record Keeping
Conclusion
We have learned the importance of business records and the different types of records
that an entrepreneur should maintain. We have used the John enterprises case to
understand how to maintain records.
Summary
Records are a legal requirement. Records help an
entrepreneur keep track of business transactions,
aid in the filing of taxes, compile final accounts and
act as a future reference. Record types include:
Credit records, Debtors records, Production
records, Cash book, Purchases records, Stock
records and Assets records. As the business
becomes more sophisticated it will be necessary to
hire a knowledgeable book keeper or accountant.
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Module 3: Entrepreneurship Lesson 4: Record Keeping
Glossary
Credit
Credit is the trust which allows one party to provide resources to
another party where that second party does not reimburse the first
party immediately (thereby generating a debt), but instead arranges
either to repay or return those resources (or other materials of equal
value) at a later date. The resources provided may be financial (e.g.
granting a loan), or they may consist of goods or services (e.g.
consumer credit). Credit encompasses any form of deferred
payment. Credit is extended by a creditor, also known as a lender, to
a debtor, also known as a borrower.
Wikipedia: http://en.wikipedia.org/wiki/Credit_(finance) CC: BY-SA
Debtors
A debtor is an entity that owes a debt to someone else. The entity
may be an individual, a firm, a government, a company or other legal
person. The counterparty is called a creditor. When the counterpart
of this debt arrangement is a bank, the debtor is more often referred
to as a borrower.
Wikipedia: http://en.wikipedia.org/wiki/Debtor CC: BY-SA
Cash book
A double-entry bookkeeping system is a set of rules for recording
financial information in a financial accounting system in which every
transaction or event changes at least two different nominal ledger
accounts. The name derives from the fact that financial information
used to be recorded in books - hence "bookkeeping" (whereas now
it's recorded mainly in computer systems) and that these books were
called ledgers (hence nominal ledger, etc.) - and that each
transaction was recorded twice (hence "double-entry"), with the two
transactions being called a "debit" and a "credit".
Wikipedia: http://en.wikipedia.org/wiki/Cash_book,_Journal CC: BY-
SA
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Module 3: Entrepreneurship Lesson 4: Record Keeping
