INTRODUCTION TO ACCOUNTING.
Hey Guys, It's a New Day again, hope your day yesterday was
awesome cos mine was. Well for today we
are beginning this course afresh like the others we are revisiting what we have
treated in order to better digest it.
WHAT IS FINANCIAL
ACCOUNTING?
Accounting
is the art of Recording, Classifying, Creating, Summarizing and Communicating in
a systematic manner, Financial Information to interested Parties, to help in
making specific Business Decisions. In Order words, it includes all processes
involved in preparing a Financial Document.
Book Keeping is the act of
Recording and Classifying Financial Transactions on a Daily Basis into
Appropriate Books. It is a Part of Accounting; it is done using the Double
Entry System.
IMPORTANCE OF BOOK KEEPING
& ACCOUNTING.
1. Accounting
Information can be used for Decision-Making.
2. It
Provides Permanent Records for all Transactions.
3. It
Helps to Ascertain the True Position of the Business.
4. It
Helps to Prevent Fraudulent Practices.
5. It
is used for Tax Assessment.
6. It
Helps to Ascertain the Assets and Liabilities of the Business.
7. It
Shows the Income and Expenditure of the Company.
DIFFERENCE
BETWEEN BOOK KEEPING & ACCOUNTING.
1. In
Book Keeping, it requires a few weeks/months to become a Proficient Book
Keeper. While In Accounting, it requires several years and experiments to
become a Professional Accountant.
2. Book
Keeping involves Day-to-Day Recording of Transactions whereas; Accounting
involves Designing of Accounting System.
3. Book
Keeping is a small part of Accounting whereas; Accounting goes beyond Recording
of Transactions.
4. Book
Keeping involves Recording and Classifying Transactions while, Accounting
involves Recording, Classifying, Summarizing, Analyzing and Interpretation of
Financial Statement/Transaction.
USERS OF FINANCIAL
INFORMATION.
1. Government
for Decision-Making and Statistics.
2. Business
Owners for Assessing the Progress of the Business. To know if the Business made
Profit or Loss.
3. Employees
need it to know the level of the business and also to determine the Wage
Demand, and Working Condition of the people.
4. Investors
need it to know the strength and Financial Position of the Business.
5. Tax
Authorities need it to fully ascertain the tax of the Business.
6. Competitors
need it to know the level of other companies in order to improve.
7. Banks
need it to ascertain the Health of the Business, if the Owner wants to take a
Loan.
8. Creditors.
9. Financial
Analyst.
10. Public.
HISTORY OF ACCOUNTING.
The Precise Date when Book
Keeping Originated is unknown but the Information available states that Book
Keeping is as old as man.
The
Starting Point can be linked to the merchants in the Babylonian and Assyrian
civilizations about 4000 years B.C. The modus operandi (way of doing things) for
keeping records then was to make marks on the wall/stone/papyrus/wax tablets.
The Method of keeping financial records was highly primitive.
The history of
accounting is not complete without mentioning an Italian monk and mathematician
LUCCA PACIOLO. In 1494 the crucial event in accounting was the introduction of
the Double Entry System called ITALIAN METHOD by LUCCA PACIOLO. He said all
transactions must have double entry on the debit side and credit side.
In 1605,
a Dutchman called Simeon Stephen advocated the profit and loss account at
yearly intervals.
In
1665, The Preparation of Balance Sheet was introduced. The level of
civilization through Technology Advancement helped in the development of modern
methods of accounting.
The
Industrial Revolution increased the scale of business transactions based on
this; more methods of accounting were needed. This was followed by the
formation of Professional Accounting Bodies like I.C.A England and Wales in
1880, I.C.A Scotland In 1854, Association of Public Accountants in USA 1887
etc.
In
Recent Years, the Rules, Policies and Principle guiding Accounting Processes in
Nigeria was almost the same as the ones in Britain.
In
1965, the Institute of Chartered Accountants of Nigeria was established and
Affiliated with the professional bodies in USA & Britain.
In
1982, Nigeria Accounting Standard Board was born to set standards to guide
accounting operations. Members include-Central Bank of Nigeria, Finance
Ministry, Nigeria Accounting Teachers Association, Chamber of Commerce etc.
Now in
Nigeria, There are two Recognized Bodies namely, Institute of Chartered Accountants
of Nigeria (ICAN) and Association of National Accountants (ANA).
PROFESSIONAL BODIES:
1. Institute
of Chartered Accountants of England and Wales.
2. Institute
of Chartered Accountants of Scotland.
3. Institute
of Chartered Accountants of Ireland.
4. Association
of Chartered Accountants.
5. Association
of National Accountants of Nigeria (ANAN).
6. Institute
of Chartered Accountants of Nigeria (ICAN).
7. Association
of Accounting Technicians.
8. Institute
of Cost and Management Accountants.
9. Chartered
Institute of Public Finance and Accountancy.
Hope this was
very helpful to you, leave a comment of what you think of this tutorial and
your questions below. Have a Blessed Day and Remember You are Amazing. God Bless.
