Accounting For Lawyers Notes, 2022

LAW SCHOOL
OF
TANZANIA
BASIC LEADERSHIP, MANAGEMENT
AND
ACCOUNTING FOR LAWYERS
LECTURE NOTES
Adv. Allen Albert Kaminda

PGDLP, LL.B
allenkaminda@gmail.com
TABLE OF CONTENT
TABLE OF CONTENT ............................................................................................................................... 2
LECTURE ONE........................................................................................................................................... 4
Introduction to accounting ................................................................................................................... 4
LECTURE TWO ......................................................................................................................................... 8
Characteristics or Features of Accounting information ................................................................. 8
Users of accounting information ....................................................................................................... 11
LECTURE THREE .................................................................................................................................... 14
Finance and Financial Management ................................................................................................. 14
Investments ............................................................................................................................................ 14
Financial Institutions ........................................................................................................................... 14
International Finance ......................................................................................................................... 14
Forms of Business Organizations ....................................................................................................... 23
Accounting Concepts and their application .................................................................................... 25
Basic Accounting Principles ................................................................................................................ 26
REVISION QUESTIONS ........................................................................................................................... 27
LECTURE FOUR ...................................................................................................................................... 30
Introduction to Public Sector Accounting and Budgeting ........................................................... 30
Introduction to Public Sector Budgets ............................................................................................. 34
LECTURE FIVE ........................................................................................................................................ 38
Introduction to Financial Statements .............................................................................................. 38
LECTURE SIX ........................................................................................................................................... 54
Updated cash book ............................................................................................................................... 54
LECTURE SEVEN..................................................................................................................................... 57
Bank reconciliation .............................................................................................................................. 57
LECTURE EIGHT ..................................................................................................................................... 61
Introduction to Auditing ...................................................................................................................... 61
LECTURE NINE........................................................................................................................................ 65
Cost Volume Profit Analysis................................................................................................................ 65
Components of Annual Report ........................................................................................................... 67
LECTURE TEN ......................................................................................................................................... 69
Introduction to Taxes .......................................................................................................................... 69
COSTS OF TAXATION ............................................................................................................................ 76
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TAX EVASION AND AVOIDANCE ......................................................................................................... 78
BASIC RECORDS MANAGEMENT NOTES.............................................................................................. 79
LECTURE ONE......................................................................................................................................... 79
Introduction to Records Management .............................................................................................. 79
LECTURE TWO ....................................................................................................................................... 85
Electronic Records ............................................................................................................................... 85
ADMISSIBILITY OF ELECTRONIC EVIDENCE IN TANZANIA............................................................... 86
Before Independence .......................................................................................................................... 86
After Independence ............................................................................................................................. 86
REVISION QUESTIONS ........................................................................................................................... 90
LECTURE ONE......................................................................................................................................... 93
Leadership.............................................................................................................................................. 93
LECTURE TWO ....................................................................................................................................... 94
Group Dynamics .................................................................................................................................... 94
LECTURE THREE .................................................................................................................................... 95
Decision Making Process and Problem Solving ............................................................................... 95
LECTURE FOUR ...................................................................................................................................... 96
Conflict Management ........................................................................................................................... 96
LECTURE FIVE ........................................................................................................................................ 98
Stress Management............................................................................................................................... 98
LECTURE SIX ......................................................................................................................................... 101
Human Resource Management ......................................................................................................... 101
LECTURE SEVEN................................................................................................................................... 104
Training and Development ............................................................................................................... 104
LECTURE EIGHT ................................................................................................................................... 107
Motivation............................................................................................................................................. 107
LECTURE NINE...................................................................................................................................... 109
Employee Performance Appraisal ................................................................................................... 109
LECTURE TEN ....................................................................................................................................... 112
Gender Relations and Treatment .................................................................................................... 112
LECTURE ELEVEN ................................................................................................................................ 114
Accountability ..................................................................................................................................... 114
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ACCOUNTING FOR LAWYERS NOTES
LECTURE ONE
Introduction to accounting
 Accounting is the process of identifying, recording, measuring, classifying,
verifying, summarizing, interpreting and communicating financial information.
 Or; Accounting is the process of identifying, measuring and communicating the
economic information of an organization to various users who need the
information for decision making.
 Accountant is a person doing accounting
 Accountancy is a professional
 Accounts are the books where you maintain or keep records.
ACCOUNTING ACTIVITIES
- Identifying transactions and events
- Measuring, recording, classifying, summarizing, analyzing
- Interpreting and communicating
a) Identifying the transactions and events
Accounting identifies transactions and events of a specific entity. A transaction is an
exchange in which each participant receives or scarifies value (for example sale of
goods for cash or on credit). It involves exchange of goods and services on cash or
credit basis.
b) Measuring the identified and events
It involves the measurement of transactions and events in monetary terms.
c) Recording
It is concerned with recording of transactions and events in orderly manner in books
of original entry.
d) Classifying
It is concerned with grouping recorded transactions of similar type at one place so as
to be most useful to the business. This activity is performed by maintaining the ledger
in which different accounts are opened. All related transactions are brought to one
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place by posting. For example, all sales of goods for or on credit on different dates
are brought to sales account.
e) Summarizing
It involves the periodic preparation of financial reports or statement such as Income
statement and statement of financial position popularly known as Balance Sheet.
f) Analyzing
This is concerned with establishment of relationship between the various items or
group of items taken from either income statement or statement of financial position
or both. The purpose of analysis is to identify the financial strengths and weaknesses
of the business. It provides the basis for interpretation.
g) Interpreting
It is concerned with explaining the meaning and significance of the results produced
by the analysis of financial reports or statements.
h) Communicating
This is concerned with the transmission of summarized, analyzed and interpreted
information to the users to enable them to make decisions.
DEFINITION OF BOOK KEEPING
Book keeping involves recording of economic events or is a part of accounting which is
concerned with the recording of business transactions on a day to day basis or
maintenance of books of accounts.
DIFFERENT BETWEEN BOOK KEEPING AND ACCOUNTING
a) Scope: Book keeping covers the first four activities of the accounting process
while accounting, in addition to book keeping covers the last four activities of
the process.
b) Stage: Book keeping is the primary stage whereas accounting is the secondary
stage. Accounting continues where book keeping ends.
c) Basic Objective: The basic objective of book keeping is to maintain systematic
records of financial transactions while the basic objective of accounting is to
prepare financial reports and statements based on the records as well as
analyzing and interpreting the reports.
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d) Nature of job: The job of a book keeper is usually routine and clerical in
nature while the job of an accountant is analytical in nature.
e) Knowledge level: The book keeper is not required to have a higher level of
training and knowledge whereas the accountant is required to have a higher
level of training and knowledge than the book keeper.
f) Supervision and checking: The book keeper does not supervise and check the
work of an accountant while the accountant supervises and checks the work of
a book keeper.
CLASSIFICATION OF ACCOUNTING INFORMATION

Accounting information may be classified in different ways such as on the basis of
purpose of information, on the basis of measurement criteria etc. there are various
types of accounting information such as;
a) Accounting information relating to financial transactions and events.
b) Accounting information relating to cost of a product, operation or a function.
c) Accounting information relating to social effects of business decisions.
d) Accounting information relating to human resources.
IMPORTANCE OR NEED FOR ACCOUNTING

- It helps to provide information on profit or loss
- Read or reference whenever information is required
- Helps government in tax assessment
- It acts as a tool of control over use of resources
- It acts as an aid to planning
- It provides information about financial performance or position and cash flow
statement
BRANCHES OF ACCOUNTING
There are three main forms branches of accounting;
 Financial accounting
 Cost accounting
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 Management accounting
a) Financial accounting
This refers to the preparation of financial statements for the use of outsiders like
creditors, banks and financial institutions etc. The main purpose is to calculate profit
or loss made by the business during the year and exhibit financial position of the
business as on a particular date.
b) Cost accounting
The function of cost accounting is to ascertain the cost of the product and to help the
management in the operation cost control.
c) Management accounting
This refers to accounting for management that is accounting which provides necessary
information to the management for discharging its functions. However, it will enable
management to take decision and control various business activities.
WHY STUDYING ACCOUNTING FOR LAWYERS?
 It imparts lawyers with knowledge on some common accounting concepts which

may emerge in legal works and what lawyers should consider when
encountering them.
 It helps to understand of accounting concepts on how to manage on law firm
deal or litigating an accounting fraud allegation.
 It helps lawyers to better understanding of the full picture of legal matters
they work on that may involve elements of accounting or finance.
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LECTURE TWO
Characteristics or Features of Accounting information
a) Understandability (expression with clarity)
For the information to be useful it has to be understandable by the user with clarity
which will help him or her to read, review and analyze the information.
b) Relevance (for decision making)
The user has to choose the best and worst options that can be easily identified is
considered to be relevant information (decision making). Information must be
available to decision makers before it loses its capacity to influence their decisions.
c) Consistency (Treatment of similar items or application of accounting policies)
Foristance;
DEPRECIATION POLICIES
(Value of an item/Years of usage)
Question one
A car which cost 10 Million and you expect to use it for 5 years. What is the
depreciation after using it for five years?
Straight Line Method - This refers to the objective of organization to determine their
method.
Year 1 – 20/100 x 10 = 2M
Year 2 – 20/100 x 10 = 2M
Year 3 – 20/100 x 10 = 2M
Year 4 – 20/100 x 10 = 2M
Year 5 – 20/100 x 10 = 2M
Reducing Balance Method
Year 1 – 20/100 x 10 = 2M
Year 2 – 20/100 x 8 = 1.6M
Year 3 – 20/100 x 6.4 = 1.28M
Year 4 – 20/100 x 5.12 = 1.024M
Year 5 – 20/100 x 4.096 = 0.8192M
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Question Two
Assuming straight line compute annual depreciation and draw a schedule showing net
book value at the end of each year 2022 to 2026?
- The cost of the asset = Tshs.100,000,000/=
- Estimated salvage value = Tshs.20,000,000/=
- Useful life of the asset = 5 Years
STRAIGHT METHOD
Depreciation = Cost of an Asset – Residual Value

Useful Life of Asset
100,000,000 – 20,000,000
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80,000,000 = 16,000,000
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 The Annual depreciation expenses is Tshs.16,000,000/=
VALUE OF AN ASSET IS Tshs.100,000,000/=

YEAR DEPRECIATION ACCUMULATED NET BOOK VALUE
DEPRECIATION
2022 16,000,000 16,000,000 84,000,000
2023 16,000,000 32,000,000 68,000,000
2024 16,000,000 48,000,000 52,000,000
2025 16,000,000 64,000,000 36,000,000
2026 16,000,000 80,000,000 20,000,000
PROFIT ON SALE = SALE PRICE – NET BOOK VALUE

PROFIT ON SALE = 51,000,000 - 36,000,000 = 15,000,000
 Therefore, The Profit on Sale is Tshs. 15,000,000/= if the car is sold at the
end of 2025.
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STOCK VALUATION POLICY
 First In, First Out (FIFO) – The 1st purchased items are the first to be sold.
 Last In, First Out (LIFO) – The Last items to entered are the first items to be
sold.
 Average Cost Method (AVCO)
 Net Realizable Value (NRV)
Foristance;
During the month of June the following transactions were done;
1st June, 2022 items purchased 200 items @50
15th June, 2022 items purchased 100 items @100
30th June, 2022 items purchased 50 items @200
During the Month 200 items were sold.
Required: What are the value of stock under FIFO, LIFO, AVCO and NVR?
Answer
Under FIFO
100 @ 100 = 10,000/=
50 @ 200 = 10,000/=
20,000/=
 Value according to FIFO is Tsh.20,000/=
Under LIFO
150 @ 50 = 7,500/=
 Value according to LIFO is Tsh.7,500/=
Under AVCO
200 @ 50 = 10,000/=
100@100 = 10,000/= 30,000/350 = 85.71
50 @ 200 = 10,000/=
350 = 30,000/=
150 @ 86 = 12,900/=
 Value according to AVCO is Tsh.12,900/=
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Under NRV
200 @ 150 = 30,000/=
 Value according to AVCO is Tsh.30,000/=
d) Comparability (The trend or with other group in the same industry)

The accounting information of an entity is considered more useful if it can be
compared with similar information of another entity.
e) Reliability (Truthful, accurate, complete)
The information may be relevant but not very reliable; thus the information should be
free of material error, bias or prejudice meaning that information should be truthful,
accurate and complete.
f) Objectivity (Neutral or not biased)
Accounting has to be verified by the knowledge person (auditors) after reaching
consensus, although not necessary complete agreement.
Users of accounting information

Accounting is often called as the language of business because it is the medium of
communication between a business firm and the various parties interested in its
financial activities. The users of accounting information include present and potential
investors, management, employees, lenders, suppliers, customers, and Government
and their agencies.
1. Owners
As providers of risk capital they need information to Judge prospects for their
investment and to decide whether they should hold, buy or sell their investment.
They are concerned with risk associated with and return to their investment.
2. Present and prospective lenders
They need information to assess future profitability and liquidity of the firm and to
decide whether to borrow money and on what terms and conditions. They are also
interested in information to determine whether their loans and interest attaching to
them will be paid when they fall due.
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3. Employees
Employees and their respective groups are interested in information about the
stability of and profitability of the employers. They are also need to assess the ability
of the business to pay remuneration, retirement benefits and to provide employment
opportunities.
4. Customers
Customers have an interest in information about the continuation of business
especially when they have established a long term business relationship with or
dependent on the firm.
5. Government and their agencies
The Government and its agencies have interest in firm’s accounting information
regulate the activities of the firm, determine taxation policies and as the basis of
national income. It also wants to ensure that the firms comply with laws on wage
payments and employee benefits.
6. Management
Management needs information to review the firm’s short term and long term
solvency, profitability in relation to turnover, profitability in relation to investments
and to decide upon the cause of action to be taken in future.
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LIMITATION OF ACCOUNTING INFORMATION
- Subjective nature inherent (Eg; Depreciation, Stock valuation, R & D etc)
Assumptions (Alternative policies)
- In ability to record non – monetary activities (Eg; Quality of staff, customer,
public image etc)
- Instability of unit of measurement
- Non recording of fully depreciated assets and those acquired without payments
(Eg; Goodwill or donation)
- Financial statements are backward looking i.e uses past data (Value of assets is
what it can generate for the future)
- Financial statements represent snap short information (slight variation of time
before or after will lead into different situation).
- They are multi – purpose statements (it is unlike generic statement to meet
different interest of varied users).
- Subject to manipulation by management
- Conflicting information (ratio analysis)
Therefore, Managers should recognize these limitations and adjust data wherever
possible to get meaningful results.
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LECTURE THREE
Finance and Financial Management
Basic Areas of Finance
- Corporate finance
- Investments
- Financial institutions
- International finance
Investments
Work with financial assets such as stocks and bonds. Value of financial assets, risk
versus return, and asset allocation.
Job opportunities
- Stockbroker or financial advisor
- Portfolio manager
- Security analyst
Financial Institutions
Companies that specialize in financial matters;
- Banks – commercial and investment, credit unions, savings and loans.
- Insurance companies
- Brokerage firms
Job opportunities
International Finance
This is an area of specialization within each of the areas discussed so far. It may allow
you to work in other countries or at least travel on a regular basis, You need to be
familiar with exchange rates and political risk and; you need to understand the
customs of other countries; speaking a foreign language fluently is also helpful.
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Why Study Finance?
 Marketing - Budgets, marketing research, marketing financial products.
 Accounting - Dual accounting and finance function, preparation of financial
statements.
 Management - Strategic thinking, job performance, profitability
 Lawyers - fundamental understanding of the finances behind a deal or dispute
 Personal finance – Budgeting, retirement planning, day-to-day cash flow issues
Business Finance
Some important questions that are answered using finance
- What long-term investments should the firm take on?

- Where will we get the long-term financing to pay for the investments?
- How will we manage the everyday financial activities of the firm?
Financial Manager
Financial managers try to answer some, or all, of these questions. The top financial
manager within a firm is usually the Chief Financial Officer (CFO);
- Treasurer – oversees cash management, credit management, capital

expenditures, and financial planning.
- Controller – oversees taxes, cost accounting, financial accounting, and data
processing.
Financial Management Decisions
i) Capital budgeting
- What long-term investments or projects should the business take on?
ii) Capital structure
- How should we pay for our assets?

- Should we use debt or equity?
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iii) Working capital management
- How do we manage the day-to-day finances of the firm?
Financial decisions
 Financing decision – where is money going to come from.

 Investment decision – how much to invest and in what assets
Goal of Financial Management
i) What should be the goal of a corporation?

- Maximize profit?
- Minimize costs?
- Maximize market share?
- Maximize the current value of the company’s stock?
ii) Does this mean we should do anything and everything to maximize owner
wealth? (Stakeholder vs shareholder views of the firm).
Maximizing shareholder’s wealth
Maximizing stock prices
Objectives of Financial management

- Maximizing earnings and earnings growth.
- Maximizing return on investments and return on equity
AGENCY PROBLEM
 Agency relationship
- Principal hires an agent to represent its interests
- Stockholders (principals) hire managers (agents) to run the company
 Agency problem
- Conflict of interest between principal and agent
- Need to achieve goal congruence
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The quest to align the two goals will lead to costs ‘agency costs’ to:
◦ Monitor managers’ behaviour, and;

◦ Create incentive schemes and control for managers to pursue shareholders’
wealth maximization.
Agency costs are the incremental costs of having an agent make decisions for a
principal.
Methods used to address the Agency Problem
a) Linking rewards to shareholder wealth improvements

 Granting directors and other senior managers share options.
 Allot shares to managers if they achieve certain performance targets, for
example, growth in earnings per share or return on shares
b) Corporate governance and regulations
 Legislation and other regulatory pressures (e.g. the Companies Act)
designed to encourage directors to act in shareholders’ interests.
 Independently minded non-executive directors should have more power to
represent shareholder interests.
 Large shareholders
c) Sackings - The threat of being sacked with the accompanying humiliation
and financial loss may encourage managers not to diverge too far from the
shareholders’ wealth path.
d) Selling shares and the take-over threat;
 Most of the large shareholders are not prepared to put large resources into
monitoring and controlling.
 They are likely to sell the share rather than intervene
e) Managerial compensation
 Incentives can be used to align management and stockholder interests
 The incentives need to be structured carefully to make sure that they
achieve the intended goal
f) Other stakeholders (Regulators, Auditors, etc)
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Financial markets
The main goal of financial markets is to take savings from those who do not wish to
consume (savings surplus units) and to channel them to those who wish to invest
more than they have presently (saving deficit units).
Financial system
Return on
Return on
investments
Financial investments
markets
money money
Saving surplus Saving deficit

units (savers) units (investors)
money money
Ф Financial
intermediaries
Return on Return on
investments investments
FINANCIAL DECISIONS
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FINANCIAL MARKETS
FINANCIAL MARKETS
- What is the goal of financial markets? How participants are interrelated?
- What are conceptual differences between types and sectors of financial
markets?
Primary and secondary markets

• Primary market – primary issues of securities are sold, allows governments,
banks, corporations to raise money by directly selling financial instruments to
the public.
• Secondary market – allows investors to trade financial instruments between

themselves. Secondary transactions take place.
Money and Capital Markets
Money markets – short-term assets (maturity less than 1 year) are traded:
◦ Certificates of deposits (CDs)

◦ Commercial papers (CPs)
◦ Treasury bills
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Capital markets – long-term assets (maturity longer than 1 year) are traded:
Stocks.
◦ Corporate bonds
◦ Long-term government bonds
Organized exchanges and over-the-counter
 Organized exchange – most of stocks, bonds and derivatives are traded. Has a
trading floor where floor traders execute transactions in the secondary market
for their clients.
 Stocks not listed on the organized exchanges are traded in the over-the-
counter (OTC) market. Facilitates secondary market transactions. Unlike the
organized exchanges, the OTC market doesn’t have a trading floor. The buy
and sell orders are completed through a telecommunications network.
FINANCIAL MARKETS
• Prices of financial instruments are determined in equilibrium by demand and

supply forces.
• They reflect market expectations regarding the future as inferred from

currently available information.
• Prices of securities depend on;
 Type of issuer
 Maturity
 Level of risk
 Type of yield
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TYPES OF FINANCIAL INSTRUMENTS
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FINANCIAL INSTRUMENTS ISSUED BY GOVERNMENT: GOALS
• To finance any shortfall between expenditures and taxes (deficit)
• To refinance maturing debt
• To finance investment projects, social programs etc.
• Treasury bills (T-bills)
• T-Bills are the largest component of the money market
• Maturities: 4 weeks, 13 weeks, 26 weeks
• Sold at a discount from face value
• Considered as a risk-free investment
• No chance of default
• Very little interest rate risk
• Are actively traded
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QUICK QUIZ
a) What are the four basic areas of finance?
b) What are the three types of financial management decisions, and what
questions are they designed to answer?
c) What are the three major forms of business organization?
d) What is the goal of financial management?
e) What are agency problems, and why do they exist within a corporation?
f) Identify advantages of Government T-bill over other securities in the financial
markets
Forms of Business Organizations

1. SOLE PROPRIETORSHIP OR SOLE TRADER
This is a business organization owned and controlled by one person. However, sole
trader is an incorporated business organization. Examples, electricians, gardeners,
plumbers, plasterers, decorators.
Advantages of sole proprietorship;
- Easiest to start
- Least regulated
- Single owner keeps all of the profits
- Taxed once as personal income
Disadvantages of sole proprietorship;
- Limited to life of owner
- Equity capital limited to owners personal wealth
- Unlimited liability
- Difficult to sell ownership interest
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2. PARTNERSHIP
This refers to a business organization owned and controlled by two or more people
pool resources and expertise, and become responsible for liabilities.
Advantages of partnership
- Two or more owners
- More capital available
- Relatively easy to start
- Income taxed once as personal income
Disadvantages of partnership
- Unlimited liability
- Partnership dissolves when one partner dies or wishes to sell
- Difficult to transfer ownership
3. CORPORATION
This refers to a business organization which undergone incorporation and therefore
exists as a legal entity separate from its owners. Its articles of incorporation state
the purpose, number of shares, number of directors etc.
Advantages of corporation;
- Limited liability
- Unlimited life
- Separation of ownership and management
- Transfer of ownership is easy
- Easier to raise capital
Disadvantages of corporation;
- Separation of ownership and management
- Double taxation (income taxed at the corporate rate and then dividends taxed
at personal rate while dividends paid are not tax deductible).
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Accounting Concepts and their application
These concepts, principles and conventions have been developed over time to provide
general guides to recording financial transactions and preparing financial reports.
BASIC ACCOUNTING ASSUMPTIONS
There are four basic accounting assumptions as follows;
i) Business entity
ii) Money measurement
iii) Accounting period
iv) Going concern
i) Business entity
A business is treated as a separate entity and distinct from its owners. The
implication is that, only books of account transactions shall belong only to the firm
and should not include personal use.
ii) Money measurement
Money is used as a unit of measure to record and report all those transactions that
can be measured in terms of money. In other words, the information which cannot be
expressed in terms of money is not included in the accounting records.
iii) Accounting period or periodicity
The economic life of a business can be broken down into periods of time, usually
twelve months during which results can be measured. These periodic intervals are
known as accounting periods and at the end of which an income statement and
statement of financial position are prepared to show the performance and financial
position.
iv) Going concern
Any firm or business is established with the assumption that will exist indefinitely or
forever. If the firm is formed for a specific project it ceases, so it is undefined. In this
aspect the business should continue to value all its resources at original cost.
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Basic Accounting Principles
There are seven basic accounting principles as follows;
i) Duality principle
ii) Matching principle
iii) Accrual principle
iv) Consistency principle
v) Materiality principle
vi) Cost principle
i) Duality principle
Every transaction has two aspects and both aspects should be recognized and
recorded by the business firm. One aspect is represented by the assets of the business
and the other by the claims against them. This duality is the basis of double entry
system.
ii) Matching principle
According to this principle, the expenses incurred in an accounting period should be
matched with the revenue recognized in that period. In other words, if revenue is
recognized on all goods sold during a period, cost of those goods sold should also be
charged to that period.
iii) Accrual principle
For a specific period it is necessary to recognize all revenue or income earned during
that period regardless of when money is received. In the same way, all expenses
incurred by the business should be included regardless of when money is paid for
them. This provides the basis of recording revenue and expenses. It say that net profit
is the difference between revenues and the expenses incurred in generating those
revenues.
iv) Consistency principle
This principle says that when a business once chooses a method for the accounting
treatment of an item, it is important that the same method must be consistently from
one accounting period to another, as well as within one accounting period. If for some
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unavoidable reason the method has to be changed, it should be clearly stated so that
users are aware of the reason for the change.
It is believed that an accountant, when is faced with a choice of figures that are both
acceptable to be used in the financial statements, tends to use the figure which will
produce a smaller profits. The business firm is therefore, encouraged to take a
conservative approach in treatment of profits and losses.
v) Materiality principle
This principle requires that the items or events having insignificant economic effect
or not being relevant to the user’s need not to be disclosed. In other words, only
significant items should be considered when preparing financial statements.
Significant (material) items are those items whose omissions or non disclosure will
result in misleading the users of those financial statements.
vi) Historical cost principle
According to this principle an asset of a business must be recorded in the accounting
records at the price paid to acquire them at the time of its acquisition i.e original
cost. Or transactions should be recorded at their original price.
REVISION QUESTIONS
1. Distinguish between accounting concepts and assumptions, why are these
important to the accounting function?
2. Explain why each of the following groups is interested in financial statement;
i) Creditors
ii) Potential investors
iii) Trade
3. Outline eight underlying accounting concepts?
4. Critically discuss the prudence accounting concept?
5. Briefly explain the “Accrual basis concept” and state its implication in
recording financial effects of the entity?
6. Explain the business entity assumption?
7. How does book keeping differ from accounting?
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THE ACCOUNTING CYCLE
Accounting cycle consists of an art of recording, classifying, and summarizing
accounting information;
 Recording: This refers to all transactions that should be recorded in the journal
or books of original entry known as subsidiary books as and when they take
place.
 Classifying: This refers to the act of posting all entries in the journal of books
of original entry to the appropriate ledger accounts so as to find out at a
glance or look the total effect of all such transactions in a particular account.
 Summarizing: To prepare the trial balance and final accounts with a view to
ascertaining the profit or loss made during a trading period and the financial
position of the business of a particular date.
Therefore, accounting cycle refers to a complete sequence of accounting procedures
which are required to be repeated in same order during each accounting period.
However, the length of each accounting period depends on the nature of the business.
It may be monthly, quarterly, semi – annually or annually. It may be a calendar or a
fiscal year.
STEPS IN THE ACCOUNTING CYCLE
1. JOURNALISING
This is the act of recording transactions in journal. The original information to be
recorded is to be found in source documents which include sales and purchases
invoices, debit and credit notes for returns, bank paying – in slips and cheque
counterfoils, receipt for cash paid out and received and correspondence containing
other financial information.
2. POSTING
This is the process of transferring the debit and credit entries from the journals to
respective accounts in the ledger. The journals includes sales and purchases journals,
returns inwards and outwards journals, general journal and the cashbooks.
28
3. PREPARING A TRIAL BALANCE
This refers to a list of the balances of all accounts in the ledger are prepared at a
particular date in order to check the equality of debit and credit balances and to
provide a summary of the date from the ledger.
4. PREPARING FINANCIAL STATEMENTS
Usually, an income statement to determine profit or loss; and the balance sheet to
ascertain financial position; are prepared from the adjusted trial balance. The use of
work sheet facilitates the preparation of the financial statements.
29
LECTURE FOUR
Introduction to Public Sector Accounting and Budgeting
"Public authority" means a body of persons, whether or not corporate, established by
or under any written law, other than, the Companies Law, whose functions are of a
public nature and are exercised in furtherance of the public policy determined by the
Government.
Public sector authorities include;
- National governments
- Regional governments
- Local governments
- Component entities [departments, agencies, boards, commissions]
Legal and Regulatory Authority in Tanzania

Accounting for public sector in Tanzania is guided by various legal documents and
standards issued by NBAA or international adopted standards. Among legal documents,
there is the constitution of the United Republic of Tanzania, the Public Finance Act,
[PFA] 2004 and the Public Procurement Act [PPA], 2004 together with their
subsequent amendments and regulations.
The constitution of the URT, chapter 7: Provision Regarding the Finances of the
United Republic - Articles 133-145 provide guidance as to how to raise, maintain and
expend the government monies. What, when and how should monies be
entered/maintained/issued from the consolidated fund.
The Accountant - General shall be responsible for management of the accounts and
the custody and safety of the public money and public property of the Government.
30
TERMINOLOGIES IN PUBLIC SECTOR ACCOUNTING
 Paymaster - General means the officer vested with the power to control the
issue of public money to accounting officers;
 Accounting officer means any officer appointed by the Paymaster General and
charged with the duty of accounting for any service in respect of which money
have been appropriated by the National Assembly or any person to whom issues
are made from the Consolidated Fund.
 Public moneys include the public revenues of the United Republic; and any
trust or other money held, whether temporarily or otherwise, by an officer in
his official capacity either alone or jointly with any other person, whether an
officer or not
Some terminologies
Look for other terminologies such as;
• Accounting officer and Warrant Holder,
• Receiver of Revenue and Collector of Revenue,
• Controller and Auditor General,
• Public Accounts Committee,
• The Economic Committee of the Cabinet
• Vote and Vote holder
• Encumbrances
Private vs. Public Sector Accounting

Public sector differ from businesses in ways that have significant implications for
financial reporting;
i) They provide services either advocating a political or social cause or carrying
out-research or other activities for the betterment of society.
ii) The objectives cannot generally be expressed in monetary terms.-they are
usually ambiguous and cannot be quantifiable
iii) Governments have relationships with the parties providing their resources that
are unlike those of the businesses
31
Key Accounting Differences;
i) Mission is not profit making, Surplus/deficit does not tell much on performance
ii) Governed by budgets not market place-revenues are determined by the
legislative action not forces of competition as it is in the sale of
goods/services.
iii) Expenditures drive revenues
iv) The budget is the most significant document not the annual report. It has
political consequences and shows direction of government
v) Less distinction between internal and external accounting and reporting (think
about users and budgets)
vi) The case for capital assets (in public they may not bring cashflows nor save
costs)
Objectives of Public Sector Accounting
The objectives of financial reporting in public sector are for accountability and
decision making purposes. Specifically, in addition to private sector accounting
reports, the ones in public sector are intended to help users;
i) Compare actual results with the budget [whether the entity is achieving
objectives established as justifications for the resources used]
ii) Determine compliance with appropriate laws, regulations and restrictions on

the use of the funds [such as bond covenants, donor and grantor restrictions,
taxing and debt limitations and so forth].
iii) Evaluate efficiency and effectiveness [value for money]
iv) Assessing the current level of taxes or charges
v) Assessing the range, volume and costs of services provided
32
Accounting for Public sector in TZ
The NBAA formally adopted the International Public Sector Accounting Standards
(IPSASs) in 2009. There is a standard, TFAS NO 24 PUBLIC SECTOR ACCOUNTING.
Gradual adoption in progress since then, include move from cash basis to accrual basis
of accounting.
Components of Financial Reports
As per IPSAS, public sector Financial reports should consist of;
i) Statement of Financial Performance (Income vs Expenditure then
surplus/deficit)
ii) Statement of financial position (assets, liabilities, equity)
iii) Statement of cash flows
iv) Statement of changes in Equity/Net Assets
v) Statement of budget performance/comparison
vi) Notes (Monetary and non - monetary information)
Users of Accounting Reports

Users are categorized into three
• Service recipients and their representatives
• Resource providers and their representatives
• Oversight agencies
These could be:
i) Governing bodies
ii) Investors and creditors
iii) Taxpayers and citizens, and organizational members
iv) Donors and grantors
v) Regulatory and oversight agencies [including higher-level government or any
other body]
vi) Employees and other constituents
33
Introduction to Public Sector Budgets
- What is a budget?
- Special features for public sector budgets
- Functions of budgets
- Types of budgets
- Budgeting process in Tanzania
What is a budget?
Budgets are at the heart of governments.
Different definitions:
- They are requests for – and, subsequently, authorisations to spend – public
money.
- A plan for future spending, against which actual spending can be compared for
internal control purposes and external control
- The budget is a plan or contract for how the Government will collect and spend
the people’s money.
- It explains how money will be collected from the public and allocated - to
different levels and components of Government, and according to different
priorities
DIFFERENT FROM BUSINESS SECTOR BUDGETS, PUBLIC SECTOR/GOVERNMENT

BUDGETS
i) Are an essential element of the financial planning, control and evaluation
process of governments.
ii) Governments are disciplined by budgets not the market place competitive
forces [Governments reflect all significant decisions-political or managerial in
their budgets].
iii) Budgets exert a major influence on accounting and reporting principles and
practices [a great relationship between budgeting and accounting].
34
FUNCTIONS OF BUDGETS
Budgets are intended to carry out at least three broad functions;
1. Planning
It entails specifying the type, quantity and quality of services that will be provided,
estimating costs and determining how to pay for the services. This includes;
- Programming-determining activities that the entity will undertake
- Resource acquisition
- Resource allocation
2. Controlling and Administering
- Are resources obtained and expended as planned?
- Monitoring resource flows and operational adjustments
- Imposing spending authority to sub-ordinates
3. Reporting and Evaluating
- Lay foundation for end of period reports and evaluation
- Budgets vs Actual Comparisons
- When tied to organization’s objectives, budgets can assist in assessment of
effectiveness and efficiency.
Types of Budgets
a) Appropriation budgets - Concerned mainly with current operating revenues and

expenditures.
b) Capital Budgets - Concerned with acquisition and construction of long term
assets.
35
Sources of revenues for the Government
The Government’s income - commonly referred to as revenue. In Tanzania, the

Government gets money from two main sources such as domestic revenue and
foreign aid.
a) Domestic revenue refers to revenue that is raised within the borders of a

country – [Tax & Non-tax revenue];
 From taxes
 Duties on imports
 Licences and permits
 Charges for services
 Fines & fees
 profits from privatization, and various other fees.
 In Tanzania, accounts for a larger portion of the total Government
budget
b) Foreign Aid refers to grants and loans made by foreign governments and
agencies and project funding, basket funding, and general budget support
(GBS).
Government Expenditure
Government expenditure can be classified in many ways, the most common is as being
Recurrent Spending or Development spending
a) In Tanzanian budget, recurrent spending is further divided into “Personnel
Emoluments” or “PE,” which refers to salaries, “Other Charges” or “OC,”
and Consolidated Fund Services (CFS), which is comprised of domestic and
foreign interest payments, amortisation (payment of the debt itself) of foreign
and domestic debts and other expenditures required to be paid by law each
year.
b) Development spending typically refers to spending on infrastructure and other
investments that do not necessarily recur each year
36
Budgeting Process in Tanzania
Exercise
Write short notes to differentiate between;
a) The Public Finance Act (PFA)
b) The Annual Finance Act (AFA)
c) The Annual Appropriation Act (AAA)
Four important steps are involved in budgeting process in Tanzania;

- Budget formulation
- Budget discussion and authorization by Parliament
- Budget Execution
- Monitoring, control and Evaluation (Reporting and Auditing)
SUMMARY OF BUDGETING PROCESS IN TANZANIA

July 1 Beginning of Fiscal year
September Ministry of Finance and Economic Affairs, The President’s
Office – Planning Commission, PMO – RALG and PO – PSM
starts planning for FY X.
November - January Government Budget frame is approved by IMTC, The
Cabinet and PBG tabled in Parliament
January - February Government Budget guidelines are distributed to MDA’s,
RS’s and LGA’s
February - March MDA’s, RS’s and LGA’s budget preparation
April - May Budgets are submitted to MoFEA scrutinization and
thereafter data entry and submitted to PSC’s
June – July 1 Parliament approves Government budget beginning of
Fiscal Year X and Budget execution for fiscal Year X
July 1 – June 30 Budget plans are executed: revenues are collected,
grants are disbursed and expenditures are made
July 1 – June 30 Monthly and quarterly financial reports are produced
July 1 Beginning of Fiscal Year T + 1 and
37
LECTURE FIVE
Introduction to Financial Statements
What is financial statement?
These are the end product of the accounting process. They are prepared so as to show
financial performance of the business.
Elements of financial statement
- Revenue
- Expenses
- Assets
- Liabilities
- Capital
Components of financial statements
- Cash flow statement

- Statement of Comprehensive Income
- Statement of financial position
- Statement of retaining earning
- Statement of notice
PREPARATION OF FINANCIAL STATEMENTS
a) Cash account
b) Ledgers or double entry or journal entry or T – Account
c) Trial balance
d) Statement of comprehensive income or income statement or profit and loss
e) Statement of financial position or balance sheet
38
QUESTION
UMEME Enterprises is a sole trader that deals with cereals retail business. It trades
on a cash only basis and its transactions for August 2020 are shown below;
Day Transactions shs’
August 1 Started with Tshs.1,800,000 cash 1800

August 1 Paid one month rent for the shop 76
August 2 Bought goods 900
August 8 Cash sales 750
August 11 Paid Telephone bill 150
August 12 Bought building 300
August 13 Bought goods 826
August 15 The owner took Shs.200,000/= from business 200
Business for personal use
August 22 Paid salaries 84
August 25 Bought equipment 660
August 25 Bought building 60
REQUIRED: Prepare cash account, trial balance, income statement and financial
position of UMEME Enterprises for the month ended on August 31st, 2020
1. CASH ACCOUNT
This refers to an account in which money transactions are recorded or is a type of

brokerage account that requires all transactions be payable in full on settlement date
with available cash.
39
CASH ACCOUNT OF UMEME ENTERPRISES AS AT THE END OF 31st AUGUST, 2020
‘000’
DR CR
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
1/8/ Capital 1,800 1/8/ Rent 76
8/8/ Sales 750 2/8/ Purchases 900
18/8/ Sales 796 11/8/ Telephone 150
26/8/ Sales 870 12/8/ Building 300
31/8/ Sales 856 13/8/ Purchases 826
15/8/ Drawings 200
22/8/ Wages 84
25/8/ Equipment 660
25/8/ Building 60
31/8/ Balance c/d 1816
TOTAL 5072 TOTAL 5072
1/9/ Balance b/d 1816
2. LEDGER OR JOURNAL ENTRY
This refers to a book containing accounts in which the classified and summarized
information from the journals is posted as debits and credits.
Advantages of ledger
- Preparation of trial balance

- Presenting final position
- Application of double entry system
- Presenting statistical information
- Collecting information
- Present financial position
Disadvantages of ledger
- Improper preparation of trial balance

- Improper presentation of financial position
- Inaccuracy of the values in the ledger
- Incorrect application of double entry system
40
DR CAPITAL ACCOUNT CR
31/8/ Balance c/d 1,800 1/8 Cash 1,800
1/9/ Balance b/d 1,800
DR SALES ACCOUNT CR
31/8/ Balance c/d 3,272 8/8/ Cash 750
18/8/ Cash 796
26/8/ Cash 870
31/8/ Cash 856
TOTAL 3,272 TOTAL 3,272
DR RENT ACCOUNT CR
1/8 Cash 76 31/8/ Balance c/d 76
1/9/ Balance b/d 76
41
DR PURCHASES ACCOUNT CR
2/8/ Cash 900 31/8/ Balance c/d 1,726
13/8/ Cash 826
TOTAL 1,726 TOTAL 1,726
DR TELEPHONE ACCOUNT CR
11/8/ Cash 150 31/8/ Balance c/d 150
DR BUILDING ACCOUNT CR
12/8/ Cash 300 31/8/ Balance c/d 360
25/8/ Cash 60
TOTAL 360 TOTAL 360
42
DR DRAWINGS ACCOUNT CR
15/8/ Cash 200 31/8/ Balance c/d 200
DR WAGES ACCOUNT CR
22/8/ Cash 84 31/8/ Balance c/d 84
1/9/ Balance b/d 84
DR EQUIPMENT ACCOUNT CR
25/8/ Cash 660 31/8/ Balance c/d 660
3. TRIAL BALANCE
A trial balance is a list of all accounts with their respective balances. It is prepared so
as to check accuracy in recording business transactions. A trial balance must balance,
that is the sum of debit balances should be equal to the sum of credit balances.
If it does not balance, there must be an error or mistake in recording which must be
corrected before preparation of financial statements.
NB: In trial balance, we only record balance brought down (balance b/d)
43
Advantages of trial balance
- It summarizes the result of all transactions during a period.

- It proves the arithmetical accuracy of accounting entries in the ledger.
- It any error is found, it can easily be rectified.
- It is a basis on which the final accounts of a firm can be prepared.
Disadvantages of trial balance
- It does not prove that all transactions have been recorded.

- It does not prove that the ledger is correct.
- Numerous errors may exist even though the trial balance columns agree.
- It cannot find the missing entry from the ledger.
ERRORS THAT DO AFFECT THE TRIAL BALANCE AGREEMENT
- Only entering one half of transaction in the accounts (not completing the
double entry)
- Entering different amounts for the debit and credit entries
- Entering two debits or two credits for a transaction
ERRORS THAT DO NOT AFFECT THE TRIAL BALANCE
i) Error of omission
The transaction was missed out completely – no debit or credit entry was made in any
account.
ii) Error of commission
The correct totals are entered on the correct sides of the accounts but the entry is
made in the wrong personal account. This often occurs when names of either
customers or supplies are similar.
iii) Error of Principle
The correct totals are made on the correct sides of the account but one half of the
transaction is entered into the wrong type of account. For example, classifying
expenditure on assets as an expense would fall under this heading.
44
v) Error of original entry
The transaction is recorded in the correct accounts and on the correct sides of the
account but the amount entered is incorrect for the transaction – the accounts are
either under or overcast.
vi) Reversal of entries
The transaction is entered with the correct accounts but the debits and credits are
reversed. For example, a credit sale would be debited to sales and the debtor’s
account would be credited.
CORRECTION OF THE ERRORS
The procedure to follow when correcting errors is as follows;
- Enter the correction into the Journal

- Correct the entries in the double entry accounts
All errors are corrected in the journal regardless of what day book they would
normally have been entered into.
TRIAL BALANCE OF UMEME ENTERPRISES AS AT THE END OF 31ST AUGUST, 2020

NO NAME OF ACCOUNT DEBIT CREDIT
1 Cash 1816 -
2 Capital - 1800
3 Sales - 3272
4 Rent 76 -
5 Purchases 1726 -
6 Telephone 150 -
7 Building 360 -
8 Drawings 200 -
9 Wages 84 -
10 Equipment 660 -
TOTAL 5072 5072
45
4. STATEMENT OF COMPREHENSIVE INCOME OR PROFIT AND LOSS
This refers to financial statement shows the operating performance of the business i.e
is the business operating profit or loss? It compares total revenues and total expenses.
Things affect sales;
- Discount allowed
- Return inwards
Things affect purchase;
- Return outwards
- Discount received
- Carriage inward
PROFIT AND LOSS ACCOUNT

REVENUES
Sales xxx
Less: Return inwards Xxx
Less: Discount allowed Xxx xxx
Adjusted sale xxx
Less: Cost of sale
Opening Stock Xxx
Add: Purchase xxx
Less: Discount received xxx
Return outward xxx
Carriage inward xxx Xxx
Cost of Goods available for sale Xxx
Less: Closing Stock Xxx xxx
Gross Profit xxx
Add: Other Income xxx
Adjusted Gross Income xxx
EXPENSES
Interest (x + xx) Xxx
Office expenses (xxx – xxx + xxx) Xxx
Salaries/Wages Xxx
Net Profit xxx
PROFIT = REVENUE – EXPENSES
46
What is revenue?
These refers to resources earned that are obtained on selling goods or services or
revenue refers to what the business has earned over a period. Examples, sales, fees,
interest received, dividend income, return outwards.
What is expenses?
These are the cost incurred to generate revenue or to run the operation of business
expenses are the cost incurred by the business over a period. Examples, electricity
bills, rent, salaries or wages, securities charges, stationeries, cleaning charges,
internet costs, fuel, maintenances.
Advantages of comprehensive income or income statement
i) To obtain net result
Profit and loss account gives the actual information about net profit or net loss the
business for an accounting period. So, it is very useful to know the financial condition
of the firm.
ii) To know total expenses
Profit and loss account gives the actual information about indirect expenses.
iii) Determination of ratio.
Profit and loss account serves to determine the ration between net profit to operating
expenses. It helps to understand the operational efficiency of the firm.
iv) Controlling
Profit and loss account helps in controlling indirect expenses by providing important
information about these expenses.
QUESTION
One of your classmates just said, “Net profit is the different between cash receipts
and cash disbursement.” Is he or she right? Why or why not?
5. STATEMENT OF FINANCIAL POSITION OR BALANCE SHEET

This financial statement shows the financial position of the business. It presents the
assets, liabilities and owner’s equity. However, a balance sheet must balance i.e
Total assets must be equal to total liabilities and owners equity.
47
Advantages of balance sheet
i) It determines risk and return
A balance sheet lists business assets and liabilities. Current and long term assets
reflect ability to generate business.
ii) It is used to secure loans and other capital.
Balance sheet allow people outside the company to understand quickly financial
condition. For example, most lenders require a balance sheet to determine financial
health of business, credit history and strong track record of repaying debts.
iii) It provides helpful ratios.
Ratios are often used in analyzing how a company is performing in terms of aspects
such as productivity, liquidity, profitable and solvency.
iv) Making financial reporting a priority.
Preparing and understanding company financial statements is an important part of the
business which keeps the information updated which can be understood to
stakeholders of your financial standing.
ASSETS
What is asset?
Assets are resources of value in the control of the entity that are utilized in the
running of the business. For example, land, buildings, equipment, oil reserves, cash,
debtors or account receivable, creditors or accounts payable, stocks, cash in hand,
cash at bank, machinery, VAT receivable.
TYPES OF ASSETS
There are two types of assets;
i) Current assets
These are those assets which may exist for a period of not more than one accounting
cycle (1 year) before it is converted into another form of asset or extinguished. They
include cash, debtors or accounts receivable, stocks or inventory, cash at bank, loans
from owners, loans from bank, VAT due, overdraft, income tax payable.
48
ii) Non-current assets
These are those assets which may be utilized in an entity for a long period of time i.e.
beyond one accounting cycle (1 year). They include Land, Buildings, Machinery, Motor
Vehicles, Furniture, goodwill, copy right, trade mark, patent right, fixtures and
fittings.
OWNERS EQUITY
There are three things to consider in owners equity which are Capital, Profit and
Drawings
OWNERS EQUITY = CAPITAL + PROFIT
 Capital is resource contributed to the entity by the OWNER.

 Profit is the resource generated by the entity through its OPERATIONS.
 Drawing are resources taken without paying.
 Owners equity is the amount of money invested by the owner in the business
making any money taken out by the owner of the business.
LIABILITIES
Liabilities are present obligations of the business whose settlement will result into
reduction in the resources of the business. These are resource borrowed from
CREDITORS (third parties). However, Liabilities must be paid back. Examples, loans,
creditors, debentures, bonds, mortgages, etc.
TYPES OF LIABILITIES
i) Current liabilities
These are liabilities or obligations that must be settled within a year. For example,
creditors, bank loan, bills payable.
ii) Non - Current liabilities

These are obligation which settlement takes more than one year.
49
ASSETS = CAPITAL + LIABILITIES
ASSETS = CAPITAL + PROFIT – DRAWINGS + LIABILITIES
OWNERS EQUITY = CAPITAL + PROFIT – DRAWINGS
STATEMENT OF FINANCIAL POSITION

NON – CURRENT/FIXED ASSETS
Buildings xx
Premises xx
Fixture xx
XX
CURRENT ASSETS
Stock Xx
Debtor Xx
Cash at Bank Xx
Cash at Hand Xx xx
Total Assets XX
Financed by;
Capital Xx
Add: Net Income Xx
Less: Drawings Xx
Ending capital XX
NON - CURRENT LIABILITIES
Loan Xx
Debentures Xx xx
CURRENT LIABILITIES
Outstanding wages Xx
Outstanding interest Xx
Creditors Xx
Total Liabilities XX
50
REVISION QUESTIONS
1. Briefly discuss any three users of financial statement and the type of the
information they need?
2. Discuss the use and importance of financial statement?
3. Describe the various qualitative characteristics of financial statement?
4. Financial accounting has been defined as “Activities which are intended to
serve the information need of external users who lack authority to prescribe
the financial information they want from the enterprise, and therefore must
use the information that management communicate to them.” Explain the
purpose of financial statements?
5. Why a statement of financial position does not show amounts for which assets
could be sold? When is such information useful?
6. Mr. Advocate owns a retail shop which he manages himself. The trial balance
prepared by him as at 30th April, 2021 appeared as follows;
NO NAME OF ACCOUNT DR CR
1 Building at cost 40,000
2 Debtors 8,700
3 Sales 88,310
4 Bank overdraft 8,050
5 Interest paid 2,250
6 Purchases 25,760
7 Long term loan 25,000
8 Office expenses paid 8,100
9 Stock on 1st May, 2020 5,800
10 Capital 11,400
11 Salaries paid 36,800
12 Provision for bad debts 7,700
13 Withdrawals 8,050
14 Fixtures and Fittings 5,000
TOTAL 140,460 140,460
51
The following additional information is also available;
i) Stock at 30th April, 2021 was valued at Tshs.3760
ii) Office expenses amounting to Tshs.750 have been incurred but not entered
in the books at 30th April, 2021
iii) Office expenses include a payment rates of Tshs.1200 covering the period
from 1st May, 2020 to 31st July, 2021
iv) Mr. Advocate owes a further Tshs.250 interest at 30th April, 2021
Required:
Prepare Mr. Advocate’s statement of comprehensive income for the year ended 30th
April, 2021 and his statement of financial position as at that date.
MR. ADVOCATE
STATEMENT OF COMPREHENSIVE INCOME AS AT THE END OF 31st APRIL, 2021.
REVENUE
Sales 88,310
Less: Cost of Goods sold
Opening Stock 5,800
Add: Purchases 25,760
Goods available for sale 31,560
Less: Closing Stock 3,760
Cost of goods sold 27,800
Gross profit 60,510
LESS: OPERATING EXPENSES
Interest paid 2250
Add: Owed Interest +250 2,500
Office expenses paid 8100
Less: Prepaid Rates (1200/15*3) -240 7,860
Salaries paid 36,800
Office expenses not recorded 750
Total expense 47,910
NET INCOME 12,600
52
MR. ADVOCATE
STATEMENT OF FINANCIAL POSITION AS AT THE END OF 30th APRIL, 2021
NON – CURRENT/FIXED ASSETS
Building at cost 40,000
Fixtures and Fittings 5,000
45,000
CURRENT ASSETS
Stock 3,760
Less: Provision for bad debts (8700-7700) 1,000
Prepaid rates (1200/15*3) 240 5,000
Total assets 50,000
Financed by:
Capital 11,400
Less: Net Income 12,600 24,000
Less: Withdrawals 8,050
Ending Capital 15,950
NON – CURRENT LIABILITIES
Long term loan 25,000
CURRENT LIABILITIES
Bank Overdraft 8050
Add: Unrecorded Office Expenses 750 8,800
Interest owed 250 9,050
Total Capital & Liabilities 50,000
7. What are effects of these transactions upon assets, liabilities and capital?
- Buy goods on credit
- Buy goods by cheque
- Pay creditor by cheque
- Owner pays more capital into the bank
- Owner takes money out of the business bank account for his own use
53
LECTURE SIX
Updated cash book
BANK STATEMENT
Mr. J. Lyne Bank Statement on 31st October, 2015
DATE DETAILS PAYMENT RECEIPTS BALANCE
1/10/ Opening Balance 589
4/10/ Credit Transfer Bellwood 240 829
6/10/ Cheque 684 145
12/10/ Direct Debit Southeast Electr. 86 59
15/10/ Cheque deposited 298 357
21/10/ Interest received 4 437
24/10/ Standing Order 350 87
25/10/ Direct Debit Eastern Insurance 92 (5) OD*
27/10/ Dishonoured Cheque 19/10/ 76 (81) OD
30/10/ Cheque 101451 115 27
31/10/ Closing Balance 27
CASH BOOK
1/10/ Balance b/d 589 4/10/ B Welsh 684
12/10/ F Brown 298 26/10/ R Lewish 115
15/10/ N Renshaw 76 27/10/ R Wakeling 99
24/10/ J Denton 223 29/10/ D Doyle 204
28/10/ L Webster 430 31/10/ Balance c/d 514
1616 1616
1/10/ Balance b/d
54
UPDATED CASH BOOK
What is updated cash book?
This refers to a cash book which has items entered into it from the Bank statement
which were previously not included.
Increasingly many transactions will appear on a business’s bank statement without the
business owner(s) taking any direct action. This is because these transactions are
largely automated. Common types of transactions which fall into this category are
direct debits, standing orders, credit transfers, interest payments and bank charges.
i) Direct debits
These occur when the business gives permission for a third party to withdraw money
from the bank account. Usually this will be to settle a bill. Most utility providers (e.g.
gas and electricity suppliers) encourage payment of bills to be made through a direct
debit arrangement. They are often paid at the same point each month but the amount
paid will vary.
ii) Standing orders
This is a payment made to a 3rd party of a fixed amount paid out on a regular basis.
iii) Credit transfers
These refer to money paid directly into our bank account. Whereas direct debits and
standing orders usually refer to payments, these refer to receipts.
iv) Interest/bank charges
Banks themselves will make entries into our bank account automatically. Interest –
both paid and received – will usually appear on a bank statement. Charges made by
the banks, e.g. for the use of an overdraft, will also appear.
v) Dishonoured cheque
This refers to a cheque received which the bank of the issuer of the cheque fails to
honour – i.e. will not pay out the amount for which the cheque is written.
55
DR UPDATED CASH BOOK (BANK ONLY)
DATE DETAILS AMOUNT DATE DETAILS AMOUNT
1/10/ Balance b/d 589 4/10/ B Welsh 684
12/10/ F Brown 298 26/10/ B Lewish 115
15/10/ N Renshaw 76 27/10/ R Wakeling 99
24/10/ J Denton 223 29/10/ D Doyle 204
28/10/ L Webster 430 31/10/ Southeast Elect 86
31/10/ Credit Transfer 240 31/10/ Standing Order 350
31/10/ Interest 4 31/10/ Insurance 92
31/10/ Dishonoured Ch 76
31/10/ Balance c/d 154
TOTAL 1860 TOTAL 1860
56
LECTURE SEVEN
Bank reconciliation
What is bank reconciliation?
This is the process of matching the balances in an entity’s accounting records for a
cash account to the corresponding information on bank statement. The purpose of the
process is to ascertain the differences between the two, and to book changes to the
accounting records as appropriate.
Bank reconciliation procedures;
i) We need to identify the items that do not appear both in the cash book and
on the bank statement, as these could be the reason for the discrepancy.
ii) The cash book will need to be brought up to date by entering items found
only on the bank statement and not in the cash book.
iii) Draw up a reconciliation statement using the updated cash book balance
and items appearing in the cash book that were not on the bank statement.
IDENTIFYING ITEMS NOT APPEARING BOTH IN THE CASH BOOK AND ON THE BANK
STATEMENT
We have to locate the items which do not appear both in the cash book and on the
bank statement as this may be the reason for any discrepancy – if the items appear
both in the cash book and on the bank statement then this would not give the reason
for any discrepancy. We ignore the balances and focus on the money paid in and out
of the business bank account.
PRODUCING BANK RECONCILIATION STATEMENT
There are likely to be entries in the cashbook which do not appear on the bank
statement. This is likely to arise out of the following situation. When a business makes
or receives payment by cheque then although this can be written immediately into
the cash book it will take time before it appears in the bank account. This is largely
because of the time taken by the bank to ‘clear’ each cheque. Normally clearing
takes around three working days to complete. Therefore any cheques deposited in a
bank near the end of a calendar month may well not appear on the bank statement
57
until early in the following month. However, there are two types of cheques we will
deal with;
a) Unrepresented cheque
These are those that have been paid out by the business and entered in the cash book
but for which the bank has not yet paid out the money.
b) Lodgements not yet credited/Uncredited cheque
These are those cheques which we have received and entered in the cash book but for
which the bank has not yet added the amount concerned to the balance as per the
bank statement.
The bank reconciliation statement will appear as follows;
J LYNE
BANK RECONCILIATION STATEMENT AS AT 31st OCTOBER, 2015.
DETAILS Tshs Tshs
Balance as per updated cash book 154
Add: Unrepresented cheque
R Wakeling 99
D Doyle 204
303
457
Less: Lodgements not yet credited
L Webster 430
BALANCE PER BANK STATEMENT 27
ALTERNATIVE METHOD OF RECONCILE THE CASH BOOK AND BANK STATEMENT

It is possible to include all the items in the Bank reconciliation statement. This would
eliminate the need to complete an updated cash book. However, this makes the
procedure more complicated and increased the chances of errors occurring even if it
does take slightly longer.
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J LYNE
BANK RECONCILIATION STATEMENT AS AT 31st OCTOBER, 2015
DETAILS
Balance as per cash book 514
Add;
Credit 240
Interest received 4
Unrepresented cheque – Wakeling 99
Unrepresented cheque – Doyle 204
547
1061
Less;
Direct Debit (SE Electricity) 86
Standing order 350
Direct Debit (Eastern Insurance) 92
Dishonoured cheque 76
Lodgements not yet credited - Webster 430

1034
BALANCE AS PER BANK STATEMENT 27
REVISION QUESTION
1. Why is it important to perform bank reconciliation when a bank statement is
received?
2. State four reasons for differences between cash book balance and bank
statement balance?
3. Outline at least four common items that may not appear in the cash book?
- Banking charges
- Standing orders
- Direct debit
- Interest paid
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4. At 30th November, 2021 a company’s cash book showed a balance overdraft at
the bank of Tshs. 786,000 whereas the bank statement showed a balance in
hand of Tshs. 3,138,000. The difference arose as follows;
i) An amount of Tshs. 552,000 paid into the bank by the company on 30 th
November was not credited by the bank until 1st December.
ii) The bank statement showed an entry on 30th November of Tshs. 282,000
for bank charges which had not been entered in the cash book.
iii) Cheques drawn by the company in November in favour of LST for Tshs.
2,181,000, UDSM for Tshs. 1,923,000 and OUT for Tshs. 654,000 had not
yet been presented for payment.
Required:
Adjust cash balance and prepare a bank reconciliation statement
DR ADJUSTED CASH BOOK CR
DETAILS AMOUNT DETAILS AMOUNT
Balance c/d 1,068,000 Balance b/d 786,000
Bank Charges 282,000
1,068,000 1,068,000
Balance b/d 1,068,000
BANK RECONCILIATION STATEMENT

DETAILS TSHS TSHS
Balance as per updated cashbook 1,068,000
Add: Unrepresented Cheques
Law School of Tanzania 2,181,000
University of Dar es Salaam 1,923,000
Open University of Tanzania 654,000 4,758,000
3,690,000
Less: Uncredited Cheques 552,000
BALANCE AS PER BANK STATEMENT 3,138,000
60
LECTURE EIGHT
Introduction to Auditing
A financial audit is an objective (unbiased) examination and evaluation of the
financial statements of an organization to make sure that the financial records are a
fair and accurate representation of the transactions they claim to represent. The
audit can be conducted internally by employees of the organization or externally by
an outside certified firm.
a) Internal Audits
Internal auditors are employed by the company or organization for whom they are
performing an audit, and the resulting audit report is given directly to management
and the board of directors. The results of the internal audit are used to make
managerial changes and improvements to internal controls.
The purpose of an internal audit is to ensure compliance with laws and regulations
and to help maintain accurate and timely financial reporting and data collection. It
also provides a benefit to management by identifying flaws in internal control or
financial reporting prior to its review by external auditors.
b) External audits
Audits performed by outside parties. Financial audits seek to identify if there are any
material mis - statements in the financial statements. Includes review of various
controls and internal systems as well as environmental risks.
An unqualified, or clean, auditor’s opinion provides financial statement users with

confidence (assurance) that the financials are both accurate and complete. External
audits, therefore, allow stakeholders to make better, more informed decisions related
to the company being audited. External auditors follow a set of standards (IAS) and
are expected to be more independent.
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Types of External Auditor’s Opinion
Upon completion of the examination of financial statements of an entity, the auditor

can give the following types of opinions;
i) Unqualified opinion
ii) Qualified opinion (Emphasis of matter)
iii) Adverse opinion
iv) Disclaimer of opinion
Auditor’s Liability
The responsibility of public accountants to safeguard the public’s interest has

increased due to;
- Increasing number of investors

- The relationship between corporate managers and stockholders becoming more
impersonal, and;
- increasingly reliance on accounting information.
Auditor’s Liability and litigations
Factors that lead to increase in litigation against auditors include;
i) Increased audit complexity caused by computerized systems, new types of

transactions and operations, more complicated accounting standards and more
international business.
ii) Pressures to reduce audit time and improve audit efficiency.
iii) Misunderstanding by users that an unqualified opinion is an insurance policy

against misstatements (expectations gap).
iv) The possibility of the plaintiff to claim their loss against the auditor, if they
were to win the case.
NB: Auditors are potentially liable for both criminal and civil offences
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Criminal offences
Like any individual or organization auditors are bound by the laws in the countries in
which they operate. So under criminal law auditors could be prosecuted for acts such
as fraud and insider trading.
Civil offences
There are two pieces of civil law of particular significance to the audit profession;
contract law and the law of tort. These establish the principles for auditor liability to
clients and to third parties, respectively.
Under contract law parties can seek remedy for a breach of contractual obligations.
Therefore, shareholders can seek remedy from an auditor if they fail to comply with
the terms of an engagement letter.
Under the law of tort auditors can be sued for negligence if they breach a duty of
care towards a third party who consequently suffers some form of loss.
Causes of legal action against auditors under the common law are;
i) Breach of contract;
ii) Negligence - failure to exercise a reasonable level of care that causes damage
to another;
iii) Gross negligence - failure to exercise even a minimal level of care (reckless
disregard) but without intent to harm or damage anyone; and
iv) Fraud –intentional concealment or misrepresentation of material facts that

cause damages to those deceived.
Examples of Litigation cases against auditors; Several cases can be cited in history,
The most notable of these are Caparo Industries Plc (Caparo) v Dickman (1990) and
Royal Bank of Scotland (RBS) vs Bannerman Johnstone MacLay (Bannerman) (2002).
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In the case of Caparo Industries Plc (Caparo) v Dickman (1990), Caparo pursued the
firm Touche Ross (who later merged to form Deloitte & Touche) following a series of
share purchases of a company called Fidelity plc. Caparo alleged that the purchase
decisions were based upon inaccurate accounts that overvalued the company. They
also claimed that, as auditors of Fidelity, Touche Ross owed potential investors a duty
of care. The claim was unsuccessful. The court concluded that the accounts were
prepared for the existing shareholders for the purposes of exercising their rights and
that the auditor had no reasonable knowledge of the purpose that the accounts would
be put to by Caparo.
In another case of Royal Bank of Scotland (RBS) vs Bannerman Johnstone MacLay

(Bannerman) (2002), RBS alleged to have lost over £13m in unpaid overdraft facilities
to insolvent client APC Ltd. They claimed that Bannerman had been negligent in
failing to detect a fraudulent and material misstatement in the accounts of APC. The
banking facility was provided on the basis of receiving audited financial statements
each year. In contrast to Touche Ross, who had no knowledge of Caparo’s intention to
rely upon the audited financial statements, Bannerman, through their audit of the
banking facility letter of APC, would have been aware of RBS’s intention to use the
audited accounts as a basis for lending decisions. For this reason it was upheld that
they owed RBS a duty of care. The judge in the Bannerman case also concluded that
the absence of any disclaimer of liability to third parties was a significant contributing
factor to the duty of care owed to them.
Measures against litigation costs
- To avoid litigations, auditors have been using the following measures

- Improving audit quality
- Using disclaimer of liability clauses
- Inserting Limited liability Agreements
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LECTURE NINE
Cost Volume Profit Analysis
The CVP model makes the assumptions that costs can be simply divided into fixed and
variable costs. It assumes that over a range of output levels – the relevant range –
fixed costs remain constant and valuable costs increase directly with output. The
variable costs behave in a linear fashion.
 The fixed costs are periodic costs so that items such as rent, rates, insurance,
depreciation etc are constant at all levels of output. There is also an
assumption that the sales revenue behave in a linear fashion ie.
 The selling price is constant per unit of output.
 Contribution is the excess of sales over variable costs and it represents the
surplus available to meet the fixed costs. Once the fixed costs have been met
any contribution left is profit.
Let us look at a basic accounting equation i.e;
SALES = VARIABLE COST + FIXED COST + PROFIT
PROFIT = SALES – (VARIABLE COST + FIXED COSTS)
CONTRIBUTION = SALES – VARIABLE COSTS
SELLING PRICE PER UNIT = FIXED COST + VARIABLE COST PER UNIT + NET INCOME
LIMITATIONS OF COST VOLUME PROFIT ANALYSIS

CVP analysis is based on a number of simplistic assumptions about cost behavior which
undermine the model’s effectiveness;
- Costs can be divided into fixed and variable costs but in reality many costs
have a fixed and variable element (semi – variable) and may not be easy to
divide.
- There is a linear relationship between output and costs and revenues. The
economists view tends to dispute this and presents a curvilinear model.
- The business has only one product or there is a specific constant product mix.
- The only factor influencing costs and revenues is output. Other factors such as
production efficiency and production methods may impact on output.
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REVISION QUESTION
QUESTION ONE
a) Classification of cost according to how they behave gives us fixed and variable
cost. With examples, briefly explain how fixed costs differ from variable costs?
b) Fill in the following table from the CVP relationships; (amounts in Tshs ‘000)
Sales Fixed costs Variable Total Profit Contribution
Costs Costs
130,000 ?? ?? 70,000 ?? 80,000
200,000 ?? ?? ?? 80,000 100,000
270,000 ?? ?? ?? 100,000 ??
ANSWER.
Formula for CVP;
Total cost = Fixed Cost + Variable Cost
Profit = Sales – Total Cost
Contribution = Sales – Variable cost
Sales Fixed costs Variable Total Profit Contribution

Costs Costs
130,000 20,000 50,000 70,000 60,000 80,000
200,000 20,000 100,000 120,000 80,000 100,000
270,000 20,000 150,000 170,000 100,000 120,000
QUESTION TWO
Boycott Industries produce only one product. The following revenues and costs have
been estimated for the forthcoming month;
Selling price Shs. 7000 per unit
Variable costs Shs. 4000 per unit
Fixed costs Shs. 240,000
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The management of the firm wishes to know the following for the forth-coming
month;
i) How many units need to be sold to breakeven?
ii) How many units must be sold to make a profit of Shs 60,000?
iii) Would it be a worthwhile policy to introduce advertising at a cost of Shs.
120,000 and to increase output from 300 units to 350 units?
iv) What should the selling price be to make a profit of Shs 432,000 on sales of
120 units?
Components of Annual Report

- Chairman’s report
- Operating and financial review (OFR)
- Director’s Remuneration report
- Report on Corporate Governance
- Auditor’s report
- Director’s report
- Financial statements
1. CHAIRMAN’S REPORT
This is given by listed companies and some other public interest entities, but not
generally otherwise.
2. OPERATING AND FINANCIAL REVIEW (OFR)
This is recommended for listed and some other public interest companies.
3. DIRECTOR’S REMUNERATION REPORT
Certain disclosures relating to Directors remuneration are required by all companies,
but in the case of listed companies these are more extensive and are presented as
separate report.
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4. REPORT ON CORPORATE GOVERNANCE
This is required for listed companies, and like the OFR and remuneration report, has
been a growth area in recent years.
5. AUDITOR’S REPORT
This is an opinion from the Auditor’s as required by the Companies Act, Chapter 5.
6. DIRECTOR’S REPORT
This is a legal requirement. The report is signed by the Chairman of the Board of
Directors.
7. FINANCIAL STATEMENTS
This includes income statements, balance sheet, statement of cash flows, statement
of changes in equity and notes on the financial statements.
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LECTURE TEN
Introduction to Taxes
What is tax and Taxation?
A tax is a compulsory financial charge or some other type of levy imposed on a
taxpayer (an individual or legal entity) by a governmental organization in order to
fund government spending and various public expenditures (regional, local, or
national)
Taxation is the whole process of setting, determining and administering/collecting
taxes from the taxpayers
TAX SYSTEM
The tax system is a principle - based integral unity of the main interconnected and
interrelated elements of taxation. These elements are;
- The regulatory
- Legal basis of taxation
- The set of taxes and fees
- Payers of taxes and fees, and;
- The mechanism of tax administration.
The totality of how taxes are set and administered in an economy.
EFFECTIVE TAX SYSTEM
Although opinions about what makes a good tax system will vary, there is general
consensus that the following five basic conditions should be maximized to the
greatest extent possible which includes fairness, adequacy, simplicity,
transparency, and administrative ease.
a) Fairness, or equity.
This means that everybody should pay a fair share of taxes. There are two important
concepts of equity which are horizontal equity and vertical equity.
 Horizontal equity
This means that taxpayers in similar financial condition should pay similar amounts in
taxes.
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 Vertical equity
This means that taxpayers who are better off should pay at least the same proportion
of income in taxes as those who are less well off
b) Adequacy
This means that taxes must provide enough revenue to meet the basic needs of
society. A tax system meets the test of adequacy if it provides enough revenue to
meet the demand for public services, if revenue growth each year is enough to fund
the growth in cost of services, and if there is enough economic activity of the type
being taxed so rates can be kept relatively low.
c) Simplicity
This means that taxpayers can avoid a maze of taxes, forms and filing
requirements. A simpler tax system helps taxpayers better understand the system
and reduces the costs of compliance.
d) Transparency
This means that taxpayers and leaders can easily find information about the tax
system and how tax money is used. With a transparent tax system, we know who is
being taxed, how much they are paying, and what is being done with the money. We
also can find out who (in broad terms) pays the tax and who benefits from tax
exemptions, deductions, and credits.
e) Administrative ease
This means that the tax system is not too complicated or costly for either taxpayers
or tax collectors. Rules are well known and fairly simple; forms are not too
complicated; the state can tell if taxes are paid on time and correctly, and the state
can conduct audits in a fair and efficient manner. The cost of collecting a tax should
be very small in relation to the amount collected.
TYPES OF TAX SYSTEMS
Tax systems always have implications to the ultimate income distribution in the
country. The common tax systems include progressive, regressive, or proportional.
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1. Progressive tax system.
A progressive tax is a tax system that increases rates as the taxable income goes up. It
is usually segmented into tax brackets that progress to successively higher rates. For
example, a progressive tax rate may move from 0% to 45%, from the lowest and
highest brackets, as the taxable amount increases. Examples of progressive tax
include individual income taxes, estate tax.
INDIVIDUAL TAX RATES FOR TANZANIA MAINLAND
Monthly Taxable Income Tax Rates
Where total income does not exceed Tshs.270,000/= NIL
Where the total income exceeds Tshs.270,000/= but does 8% of the amount in excess of the
not exceed Tshs.520,000/= amount in excess of Tshs. 270,000/=
Where the total income exceeds Tshs.520,000/= but does Tshs.20,000/= plus 20% of the
not exceed Tshs.760,000/= amount in excess of Tshs.520,000/=
Where the total income exceeds Tshs.760,000/= but does Tshs.68,000/= plus 25% of the
not exceed Tshs.1,000,000/= amount in excess of Tshs.760,000/=
Where the total income exceeds Tshs.1,000,000/= Tshs.128,000/= plus 30% of the
amount in excess of Tshs.
1,000,000/=
NOTE: Threshold per annum: Annual Income of Tshs.
3,240,000/= is not taxable
2. Regressive Tax system

The opposite of the progressive system where tax liability reduces as the taxable
amount increases. This simply means the low income tax payers end up paying
relatively higher proportion of their income in taxes than high income earners. This is
because the government assesses tax as based on the value of the asset that a
taxpayer purchases or owns. They include sales taxes on goods, and excise taxes on
consumables, such as petroleum, airfare, motor vehicles.
Another demonstration of regressive tax system is the sin tax (a subset of excise
taxes imposed on commodities or activities that are perceived to be unhealthy or
have a negative effect on society, such as cigarettes, gambling, and alcohol). Because
the amount of tax is fixed on the commodities, it ends up that low income earners
pay more tax as a proportion of their income.
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3. Proportional tax system
This is the system in which all taxpayers are required to pay the same percentage of
their income in taxes. Examples are corporate income tax and various withholding
taxes.
Tax system Illustrated
Tax Amount (TZS) Proportional Tax (%) Progressive Tax (%) Regressive Tax (%)
10,000 14 10 20
20,000 14 15 18
30,000 14 20 16
40,000 14 25 12
50,000 14 30 10
 50,000 14 35 9
From the above example, it can be seen that under the progressive tax system, the
tax liability increases with income. If we take an example of a person earning TZS
70,000 per annum, then his/her tax liability will be computed as follows under the
progressive tax system;
 The first TZS 10,000 at 10% = TZS 1,000
 The second TZS 10,000 at 15% = TZS 1,500
 The third TZS 10,000 at 20% = TZS 2,000
 The forth TZS 10,000 at 25% = TZS 2,500
 The fifth TZS 10,000 at 30% = TZS 3,000
 The excess of TZS 20,000 at 35% = TZS 7,000
 The total tax liability will be TZS (1,000 + 1,500 + 2,000 + 2,500 + 3,000 +
7,000) = TZS 17,000
NOTE: Any amount in excess of TZS 50,000 is taxed at a flat rate of 35%.
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CLASSIFICATION OF TAXES
Taxes are generally classified into two categories which are Direct and indirect
taxes.
a) Direct taxes
These are the ones paid straight or directly to the government by the taxpayer.
Examples are such as income tax, land tax, and personal property tax, Transfer taxes
(estate and gift taxes), Capital gains tax, etc.
b) Indirect taxes
These are taxes that can be transferred to another entity. Therefore, the burden of
paying them can be put on another person’s shoulders. Examples include sales taxes,
VAT, withholding taxes, excise taxes etc.
VALUE ADDED TAX
What is Value Added Tax (VAT)?
This is a consumption tax assessed on products at each stage of the production
process – from labor and raw materials to the sale of the final product.
The VAT is assessed incrementally at each stage of the production process, where
value is added. However, it is ultimately passed on to the final retail consumer.
For example, if there is a 20% VAT on a product that costs TZS 10,000 the
consumer will end up paying a price of TZS 12,000. The current VAT rate applicable in
Tanzania is 18%. If a product’s cost VAT exclusive is TZS 10,000, VAT paid on it will be
TZS 1,800 and total price VAT inclusive will be TZS 11,800.
Export of goods and services (provided they meet the “export criteria”) are zero-
rated. The threshold for registration is above TZS 40m (approximately USD 25,000).
Taxable persons are required to file their VAT returns at the last working day of the
following month. The VAT on importation is paid on importation together with
customs duty.
Being an indirect tax, VAT is paid to the government by sellers on behalf of the
ultimate taxpayer (the consumer). The tax is included in the price of
products/services and then remitted to the government on monthly basis. The seller
pays to the government the net VAT collected using the following formula;
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Consider the following example with a 18% VAT assessed at each stage;
“A bike manufacturer purchases raw materials for TZS 118, which includes a 18%
VAT. The supplier of materials will pay to the government the TZS 18 VAT
charged on the sale. After completing the manufacturing of the parts, they are
purchased by the assembler for TZS 141.6, which includes a VAT of TZS 21.6. The
manufacturer receives TZS 141.6, of which he pays TZS 3.6 to the government.
The full TZS 21.6 VAT (Output VAT) is not paid to the government, as the
manufacturer will keep the portion of VAT that he already paid to the seller of
the raw materials. Since the manufacturer paid TZS 18 in VAT to the supplier of
the raw materials (VAT input), he will pay only a VAT of TZS 3.6 (TZS 21.6 – TZS
18) to the government (i.e., the incremental VAT).”
Similarly, VAT paid at each stage can be calculated by subtracting the VAT that’s
already been charged from the VAT at the latest stage of purchase/production. As
already mentioned, the entire VAT is ultimately passed to the final buyer(s), as
consumers at the previous stages of purchase are reimbursed for the VAT they’ve
paid. The final retail consumer pays the entire sum of the VAT paid by the other
buyers at prior stages. The final consumer’s VAT can also be calculated by multiplying
the price (excl. VAT) by the VAT rate (i.e., TZS 220 * 18% = TZS 39.6).
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Stage of sale Cost VAT Price (With VAT paid to TRA
(Without VAT) (OTPT VAT – INPUT
VAT) VAT)
Supplier of materials sells to 100 18.0 118.0 18.0
Manufacturer
Manufacturer sells to Assembler 120 141.6 3.6
21.6
Assembler sells to Wholesaler 145 26.1 171.1 4.5
Wholesaler sells to Retailer 180 32.4 212.4 6.3
Retailer sells to Final Consumer 220 39.6 259.6 7.2
Total VAT to be paid TRA 39.6
ADVANTAGES OF VAT
- Constant revenue to the government under the VAT as it is a consumption-
based tax.
- It ensures better tax compliance and tax evasion is reduced.
- Revenue earned by the government via VAT is huge, as it is a low tax rate that
is applied to the consumption of goods.
- The VAT can be monitored and administered more efficiently compared to
other taxes.
- It is considered as a neutral tax as it levied on all types of business.
- Its laws and rules are very transparent, and the tax is collected over various
stages in smaller parts.
- This tax is levied on the value-added on each stage and not on the total price,
so there is no cascading effect.
- The advantage to the government is that even for the goods which remaining in
stock either with the distributor or retailer, the government receives part of
the tax.
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DISADVANTAGES OF VAT
- VAT is complicated as the identification of value-added in each stage is not
easy.
- Its implementation across the billing system can be expensive.
- Since VAT is a tax on the expense, this tax is regressive in nature, and it affects
the poor more than rich as they spend more proportion of their income.
EXERCISE
1. In Tanzania, certain items are exempted from VAT while others are zero-rated.
Briefly explain the difference between exempting an item and zero-rating the
same.
2. In your own words, briefly explain the following terms as used in accounting for
VAT;
- Special relief
- Taxable person
- Taxable supplies
COSTS OF TAXATION
These are the sum of resources used in the tax administration and collection process
in the economy. They include both government and taxpayer costs hereby named as
administrative costs and compliance costs respectively.
1. Compliance costs
Taxation transfers resources from the private sector (individuals and businesses) to
the Government or public sector, for purposes deemed worthwhile by the
Government. As a result, the private sector experiences a loss of resources equal to;
◦ The amount of the tax itself,
◦ Associated costs arising from changes in behaviour and decision-making,
◦ Costs arising from levying and collection process.
The last two (hidden costs) upon the private sector are known as 'the compliance
costs of taxation.'
The compliance costs of taxation comprise both economic and non - economic costs.
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 The economic costs, which may be estimated, consist of the monetary and
time costs in dealing with the requirements of the tax authorities. They include
the cost of time spent by a taxpayer on record-keeping and completing the tax
form or in preparing information for a tax agent or accountant; the fees paid to
a professional adviser, others like computer software.
 Non-economic costs include the psychological costs of stress and anxiety
arising from complying with a specific tax or from a tax-related activity, such
as a tax authority audit.
2. Administrative costs of taxation,

Often referred to as collection costs, are incurred by the tax authority in
administering an existing tax code. Administrative and compliance costs together
comprise the operating costs of taxation of particular importance is the relationship
of administrative costs and compliance costs.
They may be complementary (when tax simplification measures lead to reductions in
both administrative and compliance costs) or competitive to each other (when some
tasks are transferred from the tax authority to the taxpayer. In this case
administrative costs would then be relatively lower than compliance costs and vice
versa).
DEFERRED TAX
Deferred tax is a notional asset or liability to reflect corporate income taxation on a
basis that is the same or more similar to recognition of profits than the taxation
treatment.
 They arise from temporary discrepancy in tax computation or timing
differences.
 One of the most common deferred tax liability/asset examples is when a
company depreciates its assets differently than the Income Tax department.
 This variance from the tax laws creates a temporary discrepancy between
depreciation figures mentioned in a company's financial statements and the
corresponding tax reports.
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TAX EVASION AND AVOIDANCE
Tax evasion
The failure to pay or a deliberate underpayment of taxes. Underground economy –
Money - making activities that people don't report to the government, including both
illegal and legal activities. Tax evasion can result in fines, penalties and/or prison
time.
Tax avoidance
Tax avoidance is the use of legal methods of reducing taxable income or tax owed.
Claiming allowed tax deductions and tax credits are common tactics. It entails
structuring your affairs so that you pay the least amount of tax due.
Exercise
1. Tax administration has been said to be poor in developing countries with lower
tax to GDP ratios compared to developed countries.
Required: Assess the possible challenges facing developing countries in
implementing efficient tax regimes.
2. Basisawa Inc, which is registered in the VAT Register, purchases goods during a
in January worth TZS 944,000, including VAT. During the same period, the
company sells goods for TZS 1,500,000 excluding VAT. Compute the amount of
VAT Basisawa Inc will have to pay to TRA.
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BASIC RECORDS MANAGEMENT NOTES
LECTURE ONE
Introduction to Records Management
What is records?
Records means recorded information regardless of the form or medium created,

received and maintained by any institution or individual in the pursuance of its legal
obligations or records means maintenance, storage and destroying. However, records
management is governed by the Records and Achieves Management Act, No.3 of 2002.
CHARACTERISTICS OF RECORDS
 Authenticity – An authentic record can be proven to be what it purports to be,

created or sent by the person purported to have created or sent it, and create
or sent at the time purported.
 Reliability – A reliable record can be trusted as a full and accurate

representation of the transactions, activities, or fact to which it attests.
 Integrity – A complete and unaltered record is said to possess integrity.
 Usability – A usable record can be located, retrieved, presented, and

interpreted.
LIFE CYCLE OF RECORDS
- Creation - Disposition
- Use - Maintenance
IMPORTANCE OF MANAGING LEGAL RECORDS
i) Records are very sensitive to the operation of any organization.

ii) Records act as evidence before the court of law.
iii) Parliament, Government and citizen are responsible to be kept.
iv) Records act as precedent
v) Protection of Human Rights.
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TYPES OF RECORDS
1. PUBLIC RECORDS
These are records which are owned by the Government and can either be accessed by
citizen or may not be accessible unless the permission from the authority which is
responsible for such records. Example of courts record such as Judgment, Decree,
Proceedings, also Parliamentary proceedings like Hansards, laws enacted by the
Parliament of United Republic of Tanzania or House of Representatives of Zanzibar,
by – laws made by administrative organs or subsidiary legislation or any other
documents which are allowed to be accessed by General Public.
Public records which cannot be accessed by the General Public includes;
- All confidential documents under the National Security Act.
- Proceedings of the Cabinet.
- Proceedings of security organs.
- Any confidential agreement of the state.
- Proceedings within the State House.
- Acts of Union.
VALIDITY OF PUBLIC RECORDS
In order for the public records to be valid it must contain either seal or other proof
such as signature so as to be valid.
2. PRIVATE RECORDS.
These are records which must be under the custody of the individual. However, the
exception, if the Minister is of the view that there is a need for a private document to
be public document. The Minister shall consult the owner of the document and pay
full and fair compensation to the owner so as the document to be public document.
MANAGEMENT OF LEGAL RECORDS IN DIFFERENT INSTITUTION.
COURT SYSTEM
- Judgment and Ruling - Pleadings
- Decree - Court Notice
- Proceedings - Case Register
- Drawn Orders - Books of Account
- Summons
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LAW FIRMS RECORDS
- Client Files
- Books of Account
- Retainership Agreement or Engagement Letter
- Client Titles Deed
- Partnership Deed
- Licenses
ADVANTAGES OR IMPORTANCE OF RECORDS MANAGEMENT IN ANY ORGANISATIONS.
COURTS SYSTEM.
i) It saves court time, if the documents are properly kept it will take a short
time for it to be found or retrieve.
ii) It facilitate dispensation of justice, there is a say that, “Justice delayed is
justice denied.” So proper record keeping can avoid justice delay, so as
justice to be done within short time.
iii) It saves costs to the parties, if record is accessible immediately when
needed it can save cost which can be incurred by parties to find such a
document.
iv) It avoid conflict within society, once record managed properly it can afford
the court to resolve disputes within time so as to resolve conflict in society.
v) It reduce cost to the Judiciary, use of ICT in record management assist to
avoid unnecessary cost to the judiciary such as transportation cost when
moving one document to another.
vi) It avoid destruction of documents, proper record management can avoid
unnecessary damaging of document which can lead either loss of
documents.
DISADVANTAGES OF RECORDS MANAGEMENT IN COURT SYSTEM.
i) It consume time
ii) Justice delayed
iii) It increases cost to parties
iv) It increases conflicts within society
v) It increases cost to judiciary
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ADVANTAGES OR IMPORTANCE OF RECORDS MANAGEMENT IN LAW FIRMS
i) It build trust between firm and clients, proper record management lead to
security of client documents. Hence, client can trust the firm in keeping
client property.
ii) It saves time to retrieve, proper record management saves time to find a
document incase it is needed.
iii) It avoid unnecessary cost, proper record management within a firm save
unnecessary cost of finding document in institution which such document is
found.
iv) It assist accounting management of the firm, proper record keeping assist to
keep firm account properly so as to avoid loss to the firm.
v) Dispensation of justice, firm records once are properly managed will assist
dispensation of justice within time because there will be no any
unnecessary delay which will be caused by the firm due to availability of
documents.
vi) It avoid destruction of documents, proper record management can keep
safe clients documents.
DISADVANTAGES OF RECORDS MANAGEMENT IN LAW FIRMS.
i) It can cause lack of confidence of client to the firm.
ii) It cost time to retrieve documents.
iii) It cause cost.
iv) It cause improper accounting management of the firm.
v) It can cause justice delay.
vi) It can cause destruction of documents.
ACTIVITIES AND DOCUMENTS IN COURT SYSTEM
 Judgment – it provide rights of parties.
 Proceedings – it shows activities which was done during the case.
 Drawn Order and Decree – To show he or she is entitled to what.
 Summons – To procure attendance of the person who is required to appear
before court.
 Court notice – To provide notice to the audience or intended audience.
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 Court register – To register cases before a court.
LAW FIRM
 Client file – To keep clients documents for either litigation purpose,
compliance or keeping on behalf client.
 Book of Account – To keep accounting record of the firm.
 Retainership agreement or engagement agreement – To show rights and
obligation of the firm or client during advocate client relationship.
 Client Titles – To show rights of client in ownership certain properties.
 Partnership deed – To show rights, duties and obligations of partners during
the existence of partnership.
 License – it provide authorization to do certain activities.
EFFECTIVE MANAGEMENT OF RECORDS
i) Security consideration, documents are said to be effectively managed if
there is security in managing documents. Security involve avoiding
destruction, lost of documents, avoiding possession of documents by third
party.
ii) Easy to retrieve once needed, document can be said to be managed
properly if it does not consume time once needed.
iii) If there is no unnecessary cost in order to retrieve or during management,
effective management of documents must avoid cost in retrieving as well as
management of such documents.
iv) Availability of trained personnel, if there is trained personnel to keep
document it can be regarded there is effective management of document.
v) Use of technology, once technology used effectively in record management
it can be resulted to effective record management.
vi) Enough space of keeping document, if there is enough space to keep the
documents it can take to conclusion that there is effective management of
record.
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MAJOR SYMPTOMS OF POOR RECORDS MANAGEMENT
i) Having few skilled human resource, if there is a few skilled human resource
it can cause poor record management.
ii) Insufficient or lack of tools which are used in record keeping availability of
tools such as computer and other tools can cause poor record management.
iii) Availability of enough space, if there is no enough space of keeping
documents it can cause poor management of keeping records.
iv) Poor technology, insufficient use of technology or non – use of technology
can cause poor management of records.
v) Poor working environment can cause poor record management.
SOLUTION OF POOR RECORDS MANAGEMENT

i) Enough skilled human resources
ii) Conducive working environment
iii) Enough space for keeping records
iv) Sufficient tools
v) Use of advanced technology
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LECTURE TWO
Electronic Records
What is electronic records?
This refers to a system designed to receive, capture, manage and preserve records in
electronic format.
Characteristics of electronic records;
- Authenticity
- Reliability
- Integrity
- Usability
ADVANTAGES OF ELECTRONIC RECORDS
i) Easy access of documents
ii) Accurate information
iii) Posting of cases to various courts will be transparent on judicial database.
iv) Case lists for each court can be generated automatically.
v) List of cases on particular date will be known.
vi) List of cases heard or disposed of by a Judge on a particular day will be
known.
DISADVANTAGES OF ELECTRONIC RECORDS
i) Update manually
ii) Unemployment
iii) High initial cost
iv) Virus
v) ICT Personnel
CHALLENGES OF ELECTRONIC RECORDS AND ADMINISTRATION OF JUSTICE
i) Case delays
ii) Backlog of cases
iii) Lack of research materials
iv) Poor circulation of Judgments
v) Delay in getting proceedings
vi) Difficult in monitoring case flows.
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ADMISSIBILITY OF ELECTRONIC EVIDENCE IN TANZANIA
Before Independence
Documentary evidence the party to a case to prove the truth of something - hearsay
evidence. In the case of Trust Bank Tanzania Limited v. Le - Marsh Enterprises
Limited, Joseph (2002), in this case court ruled that the electronic evidence is
admissible in Tanzania courts and this was a departure from the strict rule of best
evidence rule. In admitting electronic evidence the Judge stated that the court should
not be ignorant of modern business method.
After Independence
In the case of Lazarus (2008), the court held that, in determining the admissibility of
electronic evidence stored information is not limited to emails only but may
encompass other forms of electronic evidence such as computer printout, website
message and others.
Admissibility of electronic evidence should be applied as a best evidence rule to
ensure reliability, ie, integrity of the document or record. The best evidence rule can
be the same as electronic evidence it only requires production of an original of the
document for examination by the court. According to best evidence rule the
admissibility of documentary evidence depends on whether such evidence is primary
or secondary. However, according to section 40A, section 64A, section 78A and
section 78B of the Evidence Act [CAP 6 Revised Edition, 2019] provides for the
admissibility of electronic evidence as well as section 18 and section 46 of the
Electronic Transactions Act of 2015 provides that electronic evidence shall be
admissible and its weight shall be determined in the manner. This was clearly
enunciated in the case of Emmanuel Godfrey Masonga (2015), in this case, PW 14
sought to tender on behalf of the petitioner an audio CD to prove allegations of
violence in the election by the first respondent. The respondents raise two grounds,
the first that the PW 14 was not a competent witness to tender the audio CD, as he
was not its author the second, that there were possibilities of tampering with the
audio CD. In overruling the preliminary objection, the court held that his affidavit,
together with an extended examination in chief PW 14’s evidence, presented prima
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facie evidence that satisfied the conditions set out in section 18(2) of the Electronic
Transactions Act of 2015. In this case, the court also made two important remarks;
a) Admissibility of electronic evidence is one thing and assessing its weight is

another thing.
b) In sustaining an objection cannot be based on the mere assumptions that it is
easy to tamper with electronic evidence.
There are five foundational rules that a party seeking admissibility of electronically
generated evidence must comply;
 Relevance
 Authenticity
 Original rule
 Rule against hearsay
 Unfair prejudice
1. RELEVANCE
Relevance evidence means evidence having any tendency to make the existence of
any fact that is of consequence to the determination of the action more probable or
less probable than it would be without the evidence. According to Grimm J., in
Loraine, there is a distinction between the admissibility of evidence and the weight to
which it is entitled in the eyes of the fact finder and that to be relevant, evidence
does not have to carry any particular weight: “it is sufficient if it has any tendency to
prove or disprove a consequential fact in the litigation.
2. AUTHENTICITY
This is the process of determining whether the evidence is trustworthy. However,

there are two concept such as reliability and authentication. Reliability demonstrate
that the record is capable of standing for the facts to which it attests and
authenticity means the record is what it claims to be. However, authenticity can
only exists if the three elements are in place such as reliability, integrity and
usability.
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In Tanzania, the general rule is that no writing can be admitted in evidence, unless
there is proof of execution of documents under Section 69 to section 75 of the
Evidence Act [CAP 6 R.E 2019].
Also, the requirement of authenticity can be determined whether an electronic

record is authentic or not by considering section 18(2)(3) of the Electronic
Transactions Act of 2015.
If evidence is not relevant, the enquiry ends, as evidence that is not relevant is never
admissible. Also, authenticity should be considered to be admissible. In Lazarus case,
Justice Makaramba concluded that plaintiffs have not been able to across the hurdle
of proving the authenticity of the e – mail they are seeking to produce in evidence. An
interview with him revealed that parties in Lazarus case decided to settle the dispute
out of court. The assumption that can be drawn from this scenario is that it is very
hard to meet the established standards.
3. THE ORIGINAL WRITING RULE

Any original document can be admissible if it introduce an original or duplicate
original that demonstrate one of the forms of secondary evidence is admissible.
However, the original writing rule can be applicable in writings, recordings or
photographs but when original document is not found, secondary evidence can be
admissible whether it can either be in printed paper, stored, recorded or copied in an
optional or magnetic media, produced by a computer is deemed to be a document
and becomes admissible in proceedings without further proof or production of the
original.
4. THE HEARSAY RULE
Hearsay is an out-of-court statement offered in court to prove the truth of the matter
asserted by the out-of-court declarant.
Generally, a document, electronic or otherwise, is not admissible to prove the truth
of its contents unless the testimony of a witness to that statement or through a
written account by the declarant. The hearsay rule excludes such evidence because it
possesses the testimonial dangers of perception, memory, sincerity, and ambiguity
that cannot be tested through oath and cross-examination.
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There are five separate questions that must be answered;
 Does the evidence constitute a statement;
 Was the statement made by a “declarant”;
 Is the statement being offered to prove the truth of its contents;
 Is the statement excluded from the definition of hearsay; and
 If the statement is hearsay, is it covered by one of the exceptions to the
hearsay rule. It is critical to conduct a proper hearsay analysis by considering
each of the above questions.
5. UNFAIR PREJUDICE
According to Judge Grim, when a lawyer analyses the admissibility of electronic
evidence, he or she should consider whether it would unfairly prejudice the party
against whom it is offered, confuse or mislead the jury (or assessors in this part of
the world), unduly delay the trial of the case, or interject collateral matters into the
case.
Courts are particularly likely to consider whether the admission of electronic evidence
would be unduly prejudicial in the following circumstances;
 When the evidence would contain offensive or highly derogatory language that
may provoke an emotional response;
 When analysing computer animations, to determine if there is a substantial
risk for mistaking them for the actual events in the litigation;
 When considering the admissibility of summaries of voluminous electronic
writings, recordings or photographs and lastly, in circumstances when the court
is concerned as to the reliability or accuracy of the information that is
contained within the electronic evidence.
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REVISION QUESTIONS
1. Discuss how the ICT’s has changed the way legal records management are
managed by different actors today?
Positive Aspects.
- Administration of justice by way of recording evidences
- Improve transparency
- Enhancement of efficient access
- Easiness of delivering judicial service by computer technology
- New forms of evidence, decrease of corruption in the court
- Legal research
Negative Aspects.
- Violation of confidentiality
- Networking problems (virus)
- Increased of unemployed personnel
2. Discuss why it is important for lawyers to learn about Electronic records?

- Monitoring of case flow will be easy
- It helps to keep with speed in delivering evidence
- It helps in retrieving decisions by other Judges (reference/precedent)
- It helps to prepare written summons by seeking e – records of other writers.
- Helps to write judgment easily
- Helps in taking evidence of witness.
3. Discuss the important areas for computerizing legal records in the

Judiciary of Tanzania?
- Registry
- Filling system
- Recording evidence
- Court announcement
- Scheduling of appearance date
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4. What is the legal basis of records management in Tanzania or discuss into
details laws that guide records management in Tanzania?
- The records and Archives Management Act, No.3 of 2002
- The Constitution of United Republic of Tanzania of 1977 as amended
- The Statistics Act of 2015
- The Births and Death Registration Act, Cap. 102
- The National Security Act No.3 of 1970
- Registration of Documents Act [CAP 117 Revised Edition, 2019]
- The Evidence Act [CAP 6 Revised Edition, 2019]
- The Electronic Transactions Act of 2015
5. Discuss legal records issues related to records management in the judicial
system of Tanzania?
6. Discuss how electronic records are created and maintained in the courts of
law?
7. With examples, explain what do you understand by electronic records?
8. Discuss electronic records life cycle (creation, storage, use, maintenance
and disposal)?
9. Discuss key features of electronic records in records management
practices?
10. Highlight key questions that may be asked prior admissibility of
electronic records in the court of law?
11. Differentiate legal records from court records?
12. Discuss challenges facing legal records in Tanzania Courts?
13. How are courts records managed in Tanzania?
14. Effective office records management leads to high performance of
organization. Discuss?
15. What is the relationship between records and documents?
16. Discuss the criteria used to classify records?
17. Management courts records in Tanzania has taken a new face. This
is based on the facts that, there are new enacted laws, regulations and
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rules in managing legal records. Discuss impacts of computerization of
courts records within the Judiciary of Tanzania?
18. Does digitization of case management in the Tanzania judiciary has
any impacts onto justice administration? Explain this with practical
examples from Tanzanian Courts?
19. Use of computers to manage records has changed the way cases are
managed in most judiciary systems in the global. What is the status quo of
judiciary in East African Courts?
20. Developing an essential records management program within and
organization increases efficiency in an organization. Discuss by citing
practical examples within legal practice?
21. What is your understanding on the practical admissibility of
electronic evidence in Tanzania?
22. “Records are regarded as a strategic resources.” Discuss this
statement in relation to legal practice?
23. What is the nature of legal records as far as common law system is
concern?
24. Discuss key component of records management?
25. Describe records life cycle all about?
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LECTURE ONE
Leadership
What is leadership?
This refers to the ability to develop a vision that motivates others to move with a
passion toward common goal.
What is management?
This is the ability to organize resource and coordinate the execution of task necessary
to reach a goal in a timely and cost effective manner.
Elements of leadership;
- Awareness
- Ability
- Commitment
Attributes of effective leaders
- Guiding vision - Trust
- Passion - Curiosity
- Integrity - Risk
- Honesty - Dedication
Common activities between managers Qualities of a good leader
and leaders; - Communication
- Planning - Delegation
- Organizing - Time Management
- Directing - Decision making
- Controlling - Conflict handling
Leadership styles;
- Democratic - Autocratic
- Transactional - Laissez faire - Bureaucratic
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LECTURE TWO
Group Dynamics
What is group?
This refers to two or more individuals who are connected to one another by social
relationship.
How groups help organizations?
- Creativity
- Better decisions
- Commitments
- Control
- Offset large
THEORIES OF GROUP DYNAMIC/FORMATION
a) Balance Theory
Common attitudes and values, religion, politics, lifestyle, marriage.
b) Exchange theory
This is based upon reward cost outcomes of interactions. A minimum level (reward
greater that cost) of an outcome must exist in order for attraction or affiliation to
take place.
TYPES OF GROUPS
1. Planned group Other groups;
- Concocted group - Formal groups
- Founded group
2. Emergent group
- Circumstantial group
- Self organizing group
STAGES OF GROUP DYNAMIC
 Forming group – Getting to know each other
 Storming group – Dealing with tensions and dealing group tasks.
 Norming group – Building relationship
 Performing group – Discontinue and celebrating
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LECTURE THREE
Decision Making Process and Problem Solving
What is decision making?
This refers to efficient decision making involves a series of steps that require input of
information at different stages of the process as well as a process of feedback.
DECISION MAKING PROCESS
STEP ONE: Define the problem.
STEP TWO: Determine the solution to problem.
STEP THREE: Establish goals that solving the problem should accomplish.
STEP FOUR: Identify alternatives that will solve the problem.
STEP FIVE: Develop valuation criteria based on the goals.
METHODS/PROCESS OF DECISION MAKING
i) Understanding the problem, before solving a problem you must understand
the problem carefully by acknowledgement its complexity and avoiding
assumptions and prejudice.
ii) Objective, before solving a problem you have to specify objectives of
solving and such problem so as to avoid creating another problem.
iii) Alternatives, before solving a problem you have to identify different which
may be used to solve problem.
iv) Consequences, before solving problem you have to understand the
consequences.
v) Tradeoff, involve one in return of another in solving problem.
COMMON TRAPS IN PROBLEM SOLVING
- Working on the wrong problem.
- Failing to identify key objective.
- Failing to develop a range of good and creative alternatives.
- Giving inadequate thought to tradeoffs.
- Failing to plan ahead when decisions are linked over time.
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LECTURE FOUR
Conflict Management
What is conflict management?
This refers to an opposition which blocks group or organization in reaching its goals.
Precursor conditions for conflicts to occur;
- Scarce resources.
- Conflict attitude.
- Communication barriers.
- Unresolved prior conflicts.
Effects of conflict management;
- Stress
- Absenteeism
- Staff – Turnover
- Non – Productivity
- De – motivation
What is the distinction between functional conflict and dysfunctional conflict?

 Functional conflict – works toward the goals of an organization or group.
 Dysfunctional conflict – blocks an organization or group from reaching its
goals.
LEVELS AND TYPES OF CONFLICT

 Organization conflict – within between organizations.
 Group conflict – within and between groups.
 Individual conflict – within and between individuals.
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Describe various techniques to reduce and increase dysfunctional conflicts in the
legal and judicial system?
- Frequent meeting of your team
- Allow your team to express openly
- Sharing objectives
- Having a clear and detailed Job description.
- Distributing task fairly.
- Never criticize team members publicly.
- Always be fair and just with your team.
- Being a role model.
STEPS TO RESOLVE CONFLICTS
- Assure piracy
- Empathize than sympathize
- Listen actively
- Maintain equity
- Focus on issue
- Avoid blame
- Identify the key theme
- Encourage feedback
- Identify alternative solutions
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LECTURE FIVE
Stress Management
What is stress management?
This refers to the feeling of tension occurs when a person assesses that a given
situation is about to exceed his or her ability to copy and consequently will endanger
his or well-being.
Why stress for lawyers?
- Perfectionist - Unable to delegate
- Over conscientious - High aspirational
- Driven
- Competitive
Signs of a person suffering from stress;
- Headaches
- Sleep disturbances
- Job dissatisfaction
- Stomach problem
- Muscle tension
- Low morale
Source of stress (pressure);
- Work overload and time pressure
- Unrealistic deadlines and targets
- Working isolation
- Long working hours
- Lack of support
- Family and personal stress
- Financial pressure
- Poor time management
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TYPES OF STRESS
 Job stress – This refers to the feelings that capabilities resources or needs do
not match the demand of the Job.
 Acute stress – This is a short term reaction to an immediate threat i.e
alertness and excitement, increase in energy, feeling of sadness, worries, loss
of appetite.
 Chronic stress – This is a long term reaction resulting from ongoing situations.
- High blood pressure
- Diabetes
- Irritability/Bad temper
- Anxiety and panic attacks
- Depression
- Eating disturbances
EFFECTS OF STRESS
Negative Effects;
(a) Physical effects; (b) Emotional effects;
- Weight gain or loss - Mood Swings
- Unexpected hair loss - Anxiety
- Heart palpitations - Can lead to depression
- High blood pressure
Discuss the most common work related stressors?
- Work overload
- Job security
- Working conditions
- Resource inadequacy
- Monitoring
- Management style
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Explain the individual and organizational consequences of stress?
a) Individual consequences of stress
Psychological stress; Behavioral stress;
- Depression - Substance abuse
- Frustration - Violence
- Burnout - Appetite
- Family problems - Divorces
- Anxiety - Accident proneness
-Excessive smoking
b) Organizational consequences of stress
- Absenteeism
- Compensation claims
- Raise health insurance cost
- Direct medical expenses
Discuss methods that organizations can use to manage stress and promote
employees?
- Avoid electronic monitoring
- Allow work time to recharge after period of demanding work
- Deliver important information that significantly affects employees
- Encourage positive social interactions between staffs to promote problem
solving around work issues and increase emotional support
- Simplify work by delegating powers to get organized
- Avoid unnecessary work overload, don’t take home problem to work
- Have time to relax
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LECTURE SIX
Human Resource Management
What is Human Resource Management?
This refers to the process of managing people in organizations in a structured and
through manner.
IMPORTANCE OF HUMAN RESOURCE MANAGEMENT.
i) Recruitment and training
ii) Performance appraisals
iii) Maintaining work atmosphere
iv) Managing disputes
v) Developing public relations
HUMAN RESOURCE MANAGEMENT PRACTICES
- Analyzing and designing tools
- Recruitment
- Selection
- Training and development
 Training Needs Assessment
 Instructional design
 Validation
 Implementation
Question.
Discuss the following concepts;
a) How to establish the human resource needs.
There are various ways to establish the human resource needs such as;
 Human resource planning, Job analysis in which description of all jobs and
qualifications for each position are developed.
 Suitable candidates/selection.
b) Rules governing the interview and selection tests of employees such as;
 Intelligence tests – capacity of candidate for abstract thinking and reasoning.
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 Personality tests – attempt to assess the personality of candidates in order to
make predictions about their likely behavior in a role and how he organized and
interact with environment i.e Extra/Introversion emotional, conscientiousness,
experience.
 Ability tests – Measure Job related characteristics such as number, verbal,
perceptual.
 Aptitude test – are Job specific tests that are designed to predict the potential
of an individual to perform task within Job. Example, clerical, numerical,
mechanical.
c) Methods of employees recruitment.
What is recruitment?
This refers to the process of searching and attracting applicants for various job
positions which arise from time to time in the organization.
STAGES OF RECRUITMENT
i) Defining requirements - Preparing job descriptions and specifications,
deciding terms and conditions of employment.
ii) Attracting candidates – reviewing and evaluating source of applicants inside
and outside the company, advertising using agencies and consultants.
iii) Selecting candidates – sifting applications, interviewing, testing, assessing
candidates, assessment centers, offering employment and preparing
contracts agreement.
SOURCE OF RECRUITMENT
1. Internal recruitment.
This refers to candidates are sought from within the organization.
Advantages of internal recruitment; Disadvantages of internal;
- Reduce time to hire - Leave a gap in your office
- Shorten on boarding times - Existing workforce
- Cost less - Limiting your pool of applicant
- Strengthen employee engagement
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2. External recruitment
This refers to candidates are sought from outside the hiring organization.
Advantages of external;
- Brings fresh talent from outside can help motivate the current employees to
produce and achieve more in hopes of obtaining the next promotional
opportunity.
- Hire outside opens more opportunities to get new experienced and highly
qualified and skilled candidates who will help a company meets its diversity
requirements.
Disadvantages of external recruitment;
- It can take long and cost more hiring from within the organization.
- Damage employee morale
- It takes time to train an external candidate on the system the organization
uses.
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LECTURE SEVEN
Training and Development
Training and development are planned efforts to facilitate the learning of job-related
behaviour on the part of the employees. The goal of training and development is to
enhance employee quality and motivation so as to improve productivity and meet
future needs of the organization.
Objectives of training and development;
- Meet organization needs.
- Meet individual needs.
- Improve productivity satisfaction/provision of service
PROCESS OF TRAINING AND DEVELOPMENT
- Training Needs Assessment
- Instructional design – Training goals and techniques
- Job performance appraisals
- Employees relations.
CONTINUE TRAINING
What is Training?
This refers to systematic development of skills and attitudes required by an individual
to perform adequately a given task or Job.
In legal profession, continue training is the process of imparting knowledge, skills and
attitudes to the qualified lawyers (LL.B and Post Graduated Diploma in Legal
Practice).
With regards to the Members of the Bar, training is cover under the Continue Legal
Education (CLE) supervised by Tanganyika Law Society (TLS). The Continue Legal
Education are offered in the form of seminars, conference, course, program or any
other form.
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METHODS OF CONTINUING TRAINING RELEVANT TO LAWYERS
- Attendance of lectures – seminars, conference and workshop.
- E – Learning – Through internet lawyers get access of law books, article etc.
- Writing of Articles, essays, journals and books – competence requires doing
research and read various materials.
- Teaching – Through training people acquire new knowledge and skills.
- Field study – After having law degree, so lawyers get to learn how to integrated
practice behavior
How to develop and establish Training Needs Assessment (TNA)?
- To conduct a Job Task Analysis, what kind of a job task performed by the
employees so as to know types of training to be assigned to them.
- Organization analysis, there should be a link between the training and the
organization goals.
- To conduct a person analysis, identifying specific employees who need training
and what should be trained.
Why do we need Training Needs Assessment (TNA)?
- To solve current problem
- To avoid past or current problem
- Create or taking advantage of future opportunities
- Providing learning, development or growth.
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How to conduct a Training Evaluation of the Legal Firm?
Training evaluation refers to the systematic process of collecting data in an effort to
determine the effectiveness and efficiency of training programs for the purpose of
making pertinent decision. However, the following are the five steps to follow in
conducting a training evaluation of the legal firm such as;
a) STEP ONE
Identify the purpose of evaluation before developing an evaluation system, the
purpose of evaluation must be determined. The question to be answered here is, why
do we want to evaluate the training program?
b) STEP TWO
Select the evaluation method, Kirk Patrick provides four levels of evaluating the
training program such as reaction, learning, behavior and results.
c) STEP THREE.
Design evaluation tools. These tools are used in applying the above evaluation
methods. These are questionnaire, pre – post test, interview, impact survey and
feedback forms.
d) STEP FOUR
Collect data, here the information with regards to the training evaluation is collected
from the above provided methods who and when to collect data has to be arranged at
this stage.
e) STEP FIVE
Analyze and report the results, the data collected should be analyzed and evaluated
and finally, reporting the results of the evaluation.
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LECTURE EIGHT
Motivation
What is motivation?
This refers to the force that energizes, direct and sustains behaviors.
Component of motivation;
 Direction – What a person is trying to do.
 Effort – How hard a person is trying.
 Persistence – How long a person keeps on trying.
TYPES OF MOTIVATION
a) Intrinsic motivation.
Takes place when individuals feel that their work is important, interesting and
challenging and that it provides them with a reasonable degree of autonomy,
opportunities to achieve and advance and scope to use and develop their skills and
abilities.
b) Extrinsic motivation.
This occurs when things are done to or for people in order to motivate them. These
includes rewards such as incentives, increase pay, praise or promotion; and
punishments such as disciplinary actions.
What motivates lawyers?
- Peer evaluation process
- Money or Income – compensation system
- Right working environment by improving the firm working environment
- Self – motivation – Treatment with respect and consideration.
- Delegation of authority – provide responsibilities to other.
- Participation in management which involve in management activities.
- Strategic planning – Members of firm need long term planning (security &
opportunity)
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What is the different between satisfaction and motivation?
 Motivation is the results of expectations while satisfaction is the results of
past events.
 Motivation based on the group while satisfaction based on individual variable.
 Motivation is the reason of doing something while satisfaction attitudes and
feelings people have about their work.
What are theories governing motivation for lawyers?
a) Instrumentality theories
This states rewards or punishments save as the means of ensuring that people behave
or act in desired ways. It assumes that a person will be motivated to work if rewards
and penalties are tied directly to his or her performance.
b) Content/Needs theory
This refers to the belief that the content of motivation consists of needs. An
unsatisfied need creates tension and a states of disequilibrium to restore the balance,
a goal that will satisfy the need is identified and behavior pathway that will lead to
the achievement of the goal is selected.
The implication is to focus attention on the various needs that motivate people abd
the motion that a satisfied need is no longer a motivator. The concept of a hierarchy
has no practical significance.
c) Process/Cognitive theory
The main process of theories are concerned with reinforcement, expectancy, goals,
equity and cognitive evaluation. For example, when lawyers in the firm consider the
working environment to be good will be motivated.
What influence of motivation on lawyers performance?
- Increased willingness of the lawyers in the legal firm.
- Enhanced productivity i.e motivated lawyers are more productive.
- Best utilization of the firm resources i.e Financial and physical resources.
- Improvement in employment and labour relations in the legal firm.
- Enhanced cooperation in the performance of the activities of the firm.
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LECTURE NINE
Employee Performance Appraisal
What is job performance?
This is the total expected value to the organization of the discrete behavioral
episodes that an individual carries out over a standard period of time.
What is performance appraisal?
This refers to the process of evaluating the performance and qualifications of the
employees in terms of the requirements of the job for which he is employed, for the
purposes of administration including placement, selection for promotions, providing
financial rewards and other actions which requires differential treatment among the
members of group as distinguished from actions affecting all members equally.
Or Performance appraisal refers to the behavior that accomplish results done by
employee.
But, in Tanzania under section 22(1) and section 22(2) of the Public Service
Regulations of 2003 defines “Performance” to mean to discover, evaluate and
document that potential and shortcomings of individuals to enable measures to be
taken for improvement of efficiency and effectiveness of the public service.
TYPES OF JOB PERFORMANCE.
a) Multi – Purpose feedback
This refers to the feedback collected from various source of information such as
managers, subordinate, team members and customers.
b) Rating method
This lists traits required for the job and asks the source to rate the individual on each
attribute. Where a discrete scale is used to show the number of different points, the
rating can include a scale from 1 to 10 excellent.
c) Essay method
This refers to the source answers of a series of questions about the employees’
performance in essay form.
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d) Behavior anchored rating scale method (BARS)
This method first determines the main performance dimensions of the job. Example,
interpersonal relationship. The advantage is to focus on the desired behavior that are
important to complete task.
e) Management by objectives method (MBO).
Managers and employees sit down together and develop objectives for the time
period. However, a time for managers and employees to review goals.
Describe the application of 360 degree performance appraisal in measuring
employees performance?
- Organization common goals measures
- Department by specifying goals such supervisor list goals and measures for
subordinates, and subordinate proposed goals
- Joint agreement on subordinate goals and measures such as final review of
subordinate results and periodic review periods providing feedback on interim
goals.
What are the reasons for performance appraisal by advocates or why should
lawyers do performance appraisal?
- Evaluation
- It provide continues feedback on the performance of employees
- To provide quality legal service
- To maintain status of the firm by a well performed task which attract client
- To develop an employee through suitable training
- To determine promotion of employees and measure performance accurately
- To determine training and development needs assessment
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What are procedures of doing performance appraisals for lawyers?
- Planning appraisal performance which includes performance standards.
Example, quality service, competence, number of cases, work performance
records. Example, Case Register, attendance and preparation of appraisal
performance form.
- Evaluation – measurements and review
- Rating
- Discussing results (feedback)
- Decision making – To improve performance of the employee such as
promotions, transfers, recognition and termination.
Which difficulties that legal firms should expect in the implementation of
employees performance appraisal?
- Organization policy – challenges of the firm lead to poor performance of
employees.
- Lack of clear performance appraisal which base on subjective issues rather
than performance appraisal
- Diversity of employees due to employees with different qualifications in
education, skills and experience it is difficult to evaluate them by using same
criteria.
- Lack of accountability like corruption, bias, failure to exercise managerial
duties.
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LECTURE TEN
Gender Relations and Treatment
“Women in the legal profession today no longer face the challenges that were
encountered 25-30 years back. However, there are still several unique, gender-based
issues they have to face.” With practical examples discuss the following concepts;
a) Gender dimensions within legal fraternity
This refers to the extent or proportion of involvement of men and women in a
particular undertaking.
The legal profession is still dominated by men; number of women is small compared
to men, fewer women law graduates, fewer women practitioners, fewer women in the
judiciary. There is however, ongoing increase of women in leadership positions,
Judges, Magistrates, NGO’s and TLS.
b) Gender discrimination
This refers to a situation in which one sex is more preferred than another in terms of
rules and opportunities.
Gender discrimination and harassment is found in court room, in salary levels in
opportunity for advancement, sexual harassment, inferiority complex, work family
and patriarchy still dominates legal profession. Read, section 7 of the Employment
and Labour Relations Act, 2018 provides for discrimination.
c) Affirmative action
This refers to the deliberate efforts or measures undertaken to address a particular
problem in a society. Women and legal profession for a longtime, the legal profession
has been exclusively a platform for male practitioners. The trend shows that the
number of women in the legal practice has been very small. In refusing to admit a
women to the bar.
Or, affirmative action refers to the policy of favoring members of a disadvantaged
group who suffer or have suffered from discrimination within a culture.
According to section 28(4) of the ELRA, Code of Good Practices Rules of 2007, it is not
discriminatory to take affirmative action measures consistent with the promotion of
equality or the elimination of discrimination in the work place.
112
It is not discriminatory to distinguish, exclude or prefer any person on the basis of an
inherent requirement of the job and employ citizens in accordance with the National
Development Promotion Service Act, 1999.
d) Clients’ treatments and gender relations in the legal system.
Article 13 of the CURT provides for equality before the law. Also, In the Professional
Conducts and Ethics of Advocates, there is a rule known as the “Cab – Rank Rule” that
prohibits clients discrimination. However, there are legal institutions such as TAWLA,
TAMWA, WLAC, GEWE, LHRC.
113
LECTURE ELEVEN
Accountability
Accountability and responsibility for Lawyers
- To the client – Advocate to assist client to understand the case, their legal
rights, obligations and consequences of the directions.
- To the court – Advocate to administer justice in order to reach into fair
decision.
- To the society – To provide legal service to the society with or without
payment.
- To profession – That the lawyer is responsible to maintain legal and
professional standards.
Why is it important for lawyer to be responsible and accountable?
- To conform to International standard of professional ethics.
- It improves efficiency and consistency in legal practice via the principle of
precedent.
- It leads to reasonable and justifiable decision in the organizations.
- It improves competence and professionalism.
- It maintains rules of law.
Describe the lines of lawyers accountable in Tanzania?
a) Horizontal line.
- Lawyer accountable to his colleague in the profession.
- Lawyer is accountable to himself or herself.
b) Vertical line.
- A lawyer is accountable to court
- A lawyer is accountable to Advocate Committee
- A lawyer is accountable to professional society.
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LAW SCHOOL

Adv. Allen Albert Kaminda

CLASSIFICATION OF ACCOUNTING INFORMATION

IMPORTANCE OR NEED FOR ACCOUNTING

WHY STUDYING ACCOUNTING FOR LAWYERS?

 It imparts lawyers with knowledge on some common accounting concepts which

Depreciation = Cost of an Asset – Residual Value

VALUE OF AN ASSET IS Tshs.100,000,000/=

PROFIT ON SALE = SALE PRICE – NET BOOK VALUE

d) Comparability (The trend or with other group in the same industry)

Users of accounting information

- What long-term investments should the firm take on?

- Treasurer – oversees cash management, credit management, capital

Financial Management Decisions

ii) Capital structure

- How should we pay for our assets?

- How do we manage the day-to-day finances of the firm?

 Financing decision – where is money going to come from.

Goal of Financial Management

i) What should be the goal of a corporation?

Maximizing shareholder’s wealth

Maximizing stock prices

Objectives of Financial management

◦ Monitor managers’ behaviour, and;

Methods used to address the Agency Problem

a) Linking rewards to shareholder wealth improvements

f) Other stakeholders (Regulators, Auditors, etc)

Saving surplus Saving deficit

Primary and secondary markets

• Secondary market – allows investors to trade financial instruments between

Money and Capital Markets

◦ Certificates of deposits (CDs)

Organized exchanges and over-the-counter

• Prices of financial instruments are determined in equilibrium by demand and

• They reflect market expectations regarding the future as inferred from

• Prices of securities depend on;

Forms of Business Organizations

Legal and Regulatory Authority in Tanzania

Private vs. Public Sector Accounting

ii) Determine compliance with appropriate laws, regulations and restrictions on

iii) Evaluate efficiency and effectiveness [value for money]

iv) Assessing the current level of taxes or charges

v) Assessing the range, volume and costs of services provided

Users of Accounting Reports

DIFFERENT FROM BUSINESS SECTOR BUDGETS, PUBLIC SECTOR/GOVERNMENT

a) Appropriation budgets - Concerned mainly with current operating revenues and

The Government’s income - commonly referred to as revenue. In Tanzania, the

a) Domestic revenue refers to revenue that is raised within the borders of a

Four important steps are involved in budgeting process in Tanzania;

SUMMARY OF BUDGETING PROCESS IN TANZANIA

Elements of financial statement

Components of financial statements

- Cash flow statement

PREPARATION OF FINANCIAL STATEMENTS

Day Transactions shs’

August 1 Started with Tshs.1,800,000 cash 1800

This refers to an account in which money transactions are recorded or is a type of

2. LEDGER OR JOURNAL ENTRY

- Preparation of trial balance