In any giving society people engage in one
transaction or the other.
Transaction is the process by which
goods or services exchanged hand between two or more persons. It can be in form
of trading or providing one service or the order to the people, all these
are done in other to make profit or gain.
Some of the people who engage in transaction
keep accurate records of their dealings, while other do not. Those who do not keep
accurate records, cannot tell accurately at any time the value of their assets
and liabilities and other financial activities.
In other to overcome these
constraints. book-keeping and accounting was introduced.
The development of modern book-keeping and accounting can be traced as for back as 1445-1555. that was when an Italian mathematician by name Rev. Father Luca-Pacioli introduced the present principle of book-keeping and accounting called “Double Entry System”
The development of modern book-keeping and accounting can be traced as for back as 1445-1555. that was when an Italian mathematician by name Rev. Father Luca-Pacioli introduced the present principle of book-keeping and accounting called “Double Entry System”
1.2 Definition of Book Keeping
It can be defined as the act of recording business transaction in a systematic, orderly and regular manner so as to ascertain the financial position of a business at given time.
The recording phase of accounting is
called book-keep. But accounting extends far beyond recording purpose.
1.3 Definition of Accounting
It is the process by which information that relate to financial and economic activities of business organization are classified, recorded, measured and communicated to interested parties for analysis interpreted and used.
1.4 The parties that may be interested in
accounting information (Users) are:
1. Managers
2. Employees
3. Creditors
4. Financial
analysts
5. Government
6. Public
7. Tax authorities
8. Banks
9. Shareholders etc
1.5 Difference
Between Book-keeping and Accounting
BOOK-KEEPING
|
ACCOUNTING
|
|
1
|
It need no higher
qualification for
Practitioners
|
Required higher
qualification for practitioners
|
2
|
Concerned
with recording of transactions
|
concerned with
more than recording of transactions
|
3
|
First step in
preparing accounting records
|
sub-sequent step
in preparimg accounting records
|
4
|
It can exist
without accounting
|
|
5
|
Management does
not read much on book-keeping for decision ma king
|
This is the basis
of management decision making in financial matters.
|
6
|
It does not tell
much of the financial position of the business
|
Classify account
with books of original entries, ledger, nominal and real account.
|
7
|
Do not ascertain
the profitability of the business.
|
Capable of
ascertaining the profitability of a business. Telling or showing the
financial position of a business at any time.
|
1.6 THE USES OF
ACCOUNTING INFORMATION
1.
It is use for decision making process.
It is use for decision making process.
2. It makes permanent records available
for all financial transaction.
3. It is use to determine the
profitability of a business.
4. Accounting records are use for tax
management.
5. Its usage help to detect and
prevent fraudulent practices.
6. Its records is capable of showing income
and expenditure.
7. It can also show assets and
liabilities.
1.7 THE
BENEFIT/NEEDS OF BOOK-KEEPING AND ACCOUNTING
The benefit/needs of book-keeping and accounting cannot be overemphasized. There is no sphere of economic and business life of the society that accounting is not making use of. For the business to succeed; it has to keep good records of its financial transactions.
The one man business
i.e. the sole trader, partnership, big public company, government agencies and
parastatles as well as government itself make use of accounting.
Government makes use
of accounting in the determining balance of payment, gross national product and
other purposes such as the preparation of balance sheet etc
In summary the benefit of book-keeping and accounting can be outline as follow:
Ø It provides a record which is
essential for the proper conduct of business.
Ø The existence of reliable financial
records helps in management decision making
Ø Good book-keeping practice enables
one to ascertain the profit or loss made during a trading period.
Ø Proper records keeping makes it
possible to find out how a business stands in relations to its customers.
Ø It facilitates reference making
Ø It shows purchase and sale made
within a given period.
Ø It facilitates inter4-firm
comparison.
Finally accounting is the language of business and for any business to succeed it has to understand the language accounting.
Finally accounting is the language of business and for any business to succeed it has to understand the language accounting.
As a student of accounting, it will enable you to have adequate knowledge of financial matters.
If you choose it as a career and qualified, you will get a good job and livea comfortable like any other
professional..
1.8 History of Accounting Profession
There is no precise time as it is
which account started. But record keeping date back as back as 4000 BC. The
method of keeping records then was to make marks at the wall or store to
indicate the number of things.The
modern book-keeping and accounting may be trace to 1494 when Italian mathematicians
Rev Father Luc Pacioli developed the present. Double entry system He described as
Italian method in the famous treatise symma De.
Arithmetical Geometrical proportion
or proportionally in 1494 in vernke, Rev. Father Luca-Paciolii described the
double entry system by giving insight into the reasoning behind accounting
records. He postulated that all entries must have double entry one a debtor and
one a creditor. Even though during the period the records were prepared to show
statement for the business rather than the owner. The yearly presentation was still
lacking. A Dutchman advocated the profit and loss account of yearly
inteval. The level of civilization and technology advancement help in the
development of modern method of accounting.
During the industrial revolution there was need for sophisticated accounting method. Many professional bodies were formed e.g. ICA Scotland in 1954, ICA England
During the industrial revolution there was need for sophisticated accounting method. Many professional bodies were formed e.g. ICA Scotland in 1954, ICA England
and Wale in
1880, and Association of Public Accountant USA in 1887. With the development of new methods, ownership was
separated from management. Since the discovery of double entry principle, there
has been tremendous development in accounting principles and methods. The
introduction of Micro and Mini Computers
enhanced performance but the principle remained the same.
In Nigeria,
record keeping has antecedents in ancient kingdoms and empires then there was the periodic contribution which
was recorded on wall. But the granting of Royal charter to Royal Niger
Company was the turning point in record keeping. The governing accounting
principles in Nigeria was almost the same as the one in Britain
In 1965 the Institute of Chartered Accountant of Nigeria was established and affiliated to Profession institute of Britain and USA. Many Nigerians came back as professional Accountant and became members. The institute was charge with the responsibilities of regulating accounting procedures and practice in Nigeria. In1992 another Body known as Association of National Accountants of Nigeria was also established.
In 1982 the
Nigeria Accounting Standard Board was born to set standard to guide accounting
operations. Members include Central Bank of Nigeria, Ministry of Commerce,
Nigeria Accounting Teachers Association etc.
In Nigeria now, there are two indigenous accounting bodies namely Institute of Chartered Accountants of Nigeria (ICAN) and Association of National Accountant s of Nigeria (ANAN) They prepares and conduct examinations for students who want to qualify and practice as Chartered Accountant in Nigeria.
Ref: Essential Financial Accounting by O.A. Longe & R.A.
Kazeem
