Bookkeeping and Accounting
Accounting has been in practice right from the time of barter system but the earliest discoveries by the archaeologists was the records of tasks crafted on clay tablets which were dried to be hardened by the ancient Mesopotamians, Egyptians and Babylonians which was about 2,000 BC. But the drive for more accurate method of recording as trade expands led to the development of writing, counting and arithmetic.
The modern day accounting is credited to an Italian Monk named Reverend Luca Bartolomeo de Pacioli (popularly called Luca Pacioli) who propounded the “Double Entry Principle” in 1494. The principle which forms a model for accounting preparation till today. The principle states that “For every debit entry, there must be a corresponding credit entry and for every credit entry, there must be a corresponding debit entry”. Thus, he is referred to as the Father of Accounting.
What is Book-keeping?
Book-keeping can be defined as a systematic way of recording business transactions on a daily basis in the appropriate book. The officer who is in charge of this recording is called the Book-keeper while the book in which the records are made are called the Day Book.
What is Accounting?
Accounting can be described as an act of recording, classifying, summarizing, analyzing, interpreting and communicating financial transactions to assist the users in decision making.
Qualities or Characteristics of Good Accounting Information
For any financial statement to be termed good financial report, there are some characteristics that such report must have. These include:
- Objectivity
- Relevance
- Timeliness
- Clarity
- Accuracy
- Consistency
- Comparability
- Neutrality
- Objectivity: This means that any item to be found in a financial statement must be able to be traced to the source documents. That is, there must be document like receipt, invoice, debit note, among others to support the transaction.
- Relevance: This states that any information to be found in the financial statement must be relevant to the need of the users. Any information that has no value to be added in terms of decision making is to be exempted from financial statement.
- Timeliness: This quality indicates that financial statement should be made available at a regular interval be it quarterly or yearly and must be able to meet the needs of the users. In simple term, the financial statement should be ready prior to the time that it will be required for decision making like during the Annual General Meeting (AGM) of the investors.
- Clarity: The information contain in the financial statement must be clear, free from errors and any form of ambiguity. It must be easy to read and understand by the users.
- Accuracy: Any good accounting information must be accurate and free from error. The preparer must report the actual value and be objective in his/her reporting of the financial statement.
- Consistency: A good accounting report must be consistent in nature. The preparer must stick to the selected method and format. The financial statement must be in the same format and style year in year out unless there is a change in the mode of operation of the business which requires a change in the accounting system.
- Comparability: Good accounting information must be easy to compare with the previous years’ statements or financial statements from other firms who are in the same industry with the business.
- Neutrality: A good financial statement must be free from personal opinion, assumption or subjectivity. It must free from error or taking side to favor the organization or protect the interest of a particular party.
Movement of Accounting Information
There is process by which transactions flow in the book of accounting. The process begins with buying and selling and ends at the preparation of financial report. This process if termed movement of accounting information and it includes the following:
Wow! This is a nice way to go. A professional work
ReplyDelete