Some Key Things About Bookkeeping And Accounting Accounting Essay

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Record the following transaction for the month of December for ABC Enterprise balance off all the accounts, and extract a trial balance as at 31 December 2011:

Question 1.

Describe the history of accounting, and explain the relationship between accounting and bookkeeping

It was said that the double entry bookkeeping was develop in the 14th century due to seven main ingredients by A. C. Littleton an accounting scholar.

These factors affected the booking keeping process in these days, and as a result of this, it made the job of an accountant very difficult and in this era people were illiterate. For transaction to be recorded it had to be very important due to the difficult challenge accountant had and to high cost of writing materials.

Five thousand years B.C. in Mesopotamia valley they were doing well as a result of farming. They produce some of the oldest records of commerce. As farmers reaped rewards and business growing the Mesopotamia valley the city of Babylon and Ninevah became the cities of regional commerce.

The profession what we know as an account was known as a scribe, the scribe had ditties like an accountant but more difficult an in depth.

In this year they would record the transaction on clay; this was a result of clay being plenty full and papyrus expensive. On the clay the scribe molded the terms of agreement and at the end would imprint there seal/ signatures. The clay that the transaction was molded on to would crack if altered.

In this time of accounting the use of clay was switched to papyrus which allowed for more detailed and uncomplicated records to be made.

During this period being an accountant was challenging and life threating. Accountants therefore had to be very honest and precise in there calculation and records. Failure to have these attributes could lead to death, mutilation or legal implication.

Accounting never developed in Egypt because there were low levels of literacy and lack of production of money.

Whereas in China accounting was not as develop because accounting was mostly use for evaluating the government programs and not commercial activates. Accounting did not develop in china not until the 19 century when the double entry was introduced.

The Greek contribution of coined money about 600 B.C., because of this it leads to the societies in Greece to be more developed.

In Rome accounting evolved from records kept in an adversaria/day book, the monthly postings which were recorded in a cash book know as a codex accepti et expensi. Such records had to be submitted for the use of taxation and determination of civil rights. In Rome the Quaestors was the one responsible for government receipts and disbursements, they also manage the treasury, payments on the behalf of the government and supervised their books.

Medieval accounting at this time was stagnant , accounting only develop as a result of government to collected taxes which grew out of decision taken by William when he invaded England and took position of the land in the name of the king, the main example of this is the Domesday Book. The oldest surviving accounting record in this era which keeps an annual description of rents, fines and taxes is known as the Pipe Roll or Great Roll. The Pipe Roll was known as a final record, it was done twice a year where the sheriffs were called up to pay almost half the total annual assessments his country owed. The record was made using the proffer system where a wooden stick was used recoding the transaction, this sick which was nine inches long was used before the introduction of the Pipe Roll, the stick was cut in size of how much was received.

In the 14- 16 century Italians were the fathers of accounting and the first for tracking business with the Arabic numerals.

It was said that the birth place of charted accounting was formed in Scotland in 1854 from this time on it did not take long for the profession to emerge

2.2 Relationship between accounting and bookkeeping

  An accountant is one who creates reports from the recorded financial transactions recorded by the bookkeeper and files forms with government.

Bookkeeping is the recording of financial transactions. These transactions include sales, purchases, income, receipts and payments by an individual or organization. Bookkeeping is normally carried out by a bookkeeper. Many people consider bookkeeping and accounting to be the same thing when it is not, they tend to do so because they thinks it the accounts who recorded transitions. 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. Without bookkeeping accountants would not have any figures to gather for there their financial statements the bookkeeper would recoded daily transaction in the book of original entry, the bookkeeper normally reports an take orders from the accountant and at the end of the month the book are balanced by only the accountant.

Some Key things about bookkeeping and accounting:

"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 Godown. Most difficult work of accountant is to make final account and analysis of financial statements." [1] 

2.4 The main users of accounting information and their purpose of use.

There are two categories of users of accounting these are internal and external

2.4.1 Internal Users - these are uses from inside the business

Owners- this user rely on accounting to know whether or not the business is making a profit and if it needs to borrow money an how much and also if the business can afford to pay back the money it borrows, it also tells them how great sales are doing an weather to continue investing in the business or put it up for sale. They also uses this information to decides when it a good time for expanding of the business it is also used to audit senior managers to make sure they are spending the companies money into the company and not for their personal uses or to take very high salaries or rises which there are not applicable.

Managers- they rely on accounting information to the profitable of the business and to run the business efficiently an plan for the future, to know if they are reaching the desired sales targets, to ascertain the performance of the business whether it should be improved to know whether or not they need to implement new stagey and the profitably of the business.

Employees & their representatives- to know the financial strengths of the business if they are making enough money to continue getting their monthly salaries, if they need to demand higher wages and salaries, pension funding and retirement benefits.

2.4.2 Externally - these are users outside of the business

Governments/ Inland revenue- to ascertain and make sure business is tax compliance and paying over the right amount in taxes to, make sure business are not over charging customers for eg. Jamaica Public Services who charge customers more than what they should.

Shareholders/investors-the main aim of this user is to know if the profitable of the business and if it is doing well to invest their funds into it and to know if the business will be able to pay dividends at the end.

Lenders, Financial institution and Creditors- these user provide additional financing to the business it is interested in making sure the business can back money lent to the business it is also concern with the risk of lending money to the business and how well they are able to repay without defaulting on the loan. Creditors also include suppliers as well as, they would want to know the credit worthiness of the business and who well and quickly they can settle the bills owing.

Question 2.

The answers to question number 2 for the ledger accounts and trial balance are found in Appendix 1 and Appendix 2 respectively.

Appendix 1

Appendix 2