Monitoring Individual Accounts Receivable Accounting Essay

Published:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

The name that looms largest in early accounting history is Luca Pacioli, who in 1494 first described the system of double-entry bookkeeping used by Venetian merchants. Of course, businesses and governments had been recording business information long before the Venetians. But it was Pacioli who was the first to describe the system of debits and credits in journals and ledgers that is still the basis of today's accounting systems.

The double entry system was first used in Genoa, Italy around the 13th century and was further polished in Venice. Luca Pacioli wrote about the "Method of Venice" in his 1494 book, The Summa and this caused him to be called "the father of accounting". This method called for three books to be used when recording transactions; a memorandum book, a journal and a ledger. Entries where posted from the memorandum book to the journal with debits on the left and credits on the right. A trial balance was required at the end of a financial period.

The industrial revolution spurred the need for more advanced cost accounting systems, and the development of corporations created much larger classes of external capital providers - shareowners and bondholders - who were not part of the firm's management but had a vital interest in its results. The rising public status of accountants helped to transform accounting into a profession, first in the United Kingdom and then in the United States. In 1887, thirty-one accountants joined together to create the American Association of Public Accountants. The first standardized test for accountants was given a decade later, and the first CPAs were licensed in 1896.

With the Industrial revolution businesses expanded to great size, both in terms of sales, purchases and staff. These larger business required capital and capital required investors who in turn required proper reporting of funds. They were also subject to increased government regulation and taxation.

Accounting kept on advancing to the present day and involves the standardization of reporting 

and the development of international accounting standards.

The knowledge economy along with the ongoing information technology changes is affecting the way we are doing business. We are becoming customers of each other, and the economic value chain is integrating our businesses with our suppliers, customers, and governments. As accounting is concerned, these peculiar changes are being reflected in the present trends of shifting our attention from an obsolete quantitative approach to a qualitative obsession where quality, customer satisfaction, and innovation become the most important components.

What is Accounting?

Accounting is generally considered to be the process of keeping track of a business' finances by logging its accounts payable, accounts receivable and other financial transactions - often with accounting. Accounting is also a profession consisting of individuals having the formal education to carry out these tasks

One part of accounting focuses on presenting the information in the form of general-purpose financial statements (balance sheet, income statement, etc.) to people outside of the company. These external reports must be prepared in accordance with generally accepted accounting principles often referred to as GAAP or US GAAP. This part of accounting is referred to as financial accounting.

Accounting also entails providing a company's management with the information it needs to keep the business financially healthy. These analyses and reports are not distributed outside of the company. Some of the information will originate from the recorded transactions but some of the information will be estimates and projections based on various assumptions. Three examples of internal analyses and reports are budgets, standards for controlling operations, and estimating selling prices for quoting new jobs. This area of accounting is known as management accounting.

Another part of accounting involves compliance with government regulations pertaining to income tax reporting.

Today much of the recording, storing, and sorting aspects of accounting have been automated as a result of the advances in computer technology.

What is bookkeeping?

Bookkeeping involves the recording, storing and retrieving of financial transactions for a company, nonprofit organization, individual, etc.

Common financial transactions and tasks that are involved in bookkeeping include:

Billing for goods sold or services provided to clients.

Recording receipts from customers.

Verifying and recording invoices from suppliers.

Paying suppliers.

Processing employees' pay and the related governmental reports.

Monitoring individual accounts receivable.

Recording depreciation and other adjusting entries.

During the bookkeeping process the bookkeeper must pay attention to details on document that is base for recording (for example, sum, essence of transaction, partner of the company). In some legal systems there are prescribed requirements regarding information that must be included in document. If all necessary information is not included, then document may be invalid and cannot be used for bookkeeping.

There are two bookkeeping systems: single-entry bookkeeping system and double-entry bookkeeping system. Single-entry system usually is used by individuals and double-entry system is used by companies.

A person that does bookkeeping is called bookkeeper, while a person that does accounting (uses data provided by bookkeeper to prepare tax reports) is called an accountant.

Bookkeeping requires knowledge of debits and credits and a basic understanding of financial accounting, which includes the balance sheet and income statement.

The relationship between accounting and bookkeeping.

The terms accountant and bookkeeper are often used interchangeably, but they are not the same occupation. Bookkeepers are the line employees of the accounting function, performing invoicing, payroll, cash collection and other routine tasks. Accountants supervise bookkeepers and have many other responsibilities.

Accountants and bookkeepers are responsible for recording the daily activities of a company in the accounting records. These transactions are usually recorded by business cycle, and in larger companies a separate employee may be in charge of each cycle. Routine transactions are usually recorded by the bookkeepers, and more complex transactions are recorded by accountants. In fact, bookkeepers in organizations may be referred to as accounting clerks.

Accountants vs. bookkeepers

Book keeping is just record of transaction, but accounting is huge science of recording, classification, analyze and summarizing of business transaction and interpretation of different result.

2. A book keeper always works under head accountant and book keeper is often said account assistant.

3. Calculation of tax and filling of tax return is the part of duties of accountant. But, he can take help from book keeper for tracking the total of the incomes of business.

4. Book keeping is just like machine work in which book keeper passes the vouchers into books but accounting work is fully professional and need high experience for analysis and interpretation of financial statements.

5. Most difficult part of book keeping work is to reconciliation of bank account with pass book, cash balance with physical cash in hand, stock in books with physical stock in Go down. Most difficult work of accountant is to make final account and analysis of financial statements.

Both bookkeepers and accountants play a key role in your business.

The main users of accounting information

Accounting is often called the language of business because all organizations set up an accounting information system to communicate data to help people make better decisions. The accounting information system serves many kinds of users who can be divided into two (2) groups: External and Internal users.

External information users

External users of accounting information are not directly involved in running the organization. Yet many of their important decisions depend on specially information that is reliable, relevant and comparable. They include:

Shareholders (investors)

Lenders

Customers

Directors

Suppliers

The media

Lawyers

Each external user has special information needs depending on the types of decision to be made.

Lenders (Creditors)

They loan money or other resources to an organization. Lenders look for information to help them assess whether an organization it likely to repay

Writing Services

Essay Writing
Service

Find out how the very best essay writing service can help you accomplish more and achieve higher marks today.

Assignment Writing Service

From complicated assignments to tricky tasks, our experts can tackle virtually any question thrown at them.

Dissertation Writing Service

A dissertation (also known as a thesis or research project) is probably the most important piece of work for any student! From full dissertations to individual chapters, we’re on hand to support you.

Coursework Writing Service

Our expert qualified writers can help you get your coursework right first time, every time.

Dissertation Proposal Service

The first step to completing a dissertation is to create a proposal that talks about what you wish to do. Our experts can design suitable methodologies - perfect to help you get started with a dissertation.

Report Writing
Service

Reports for any audience. Perfectly structured, professionally written, and tailored to suit your exact requirements.

Essay Skeleton Answer Service

If you’re just looking for some help to get started on an essay, our outline service provides you with a perfect essay plan.

Marking & Proofreading Service

Not sure if your work is hitting the mark? Struggling to get feedback from your lecturer? Our premium marking service was created just for you - get the feedback you deserve now.

Exam Revision
Service

Exams can be one of the most stressful experiences you’ll ever have! Revision is key, and we’re here to help. With custom created revision notes and exam answers, you’ll never feel underprepared again.