Accounting is
both a profession and an academic discipline. It is defined by different people
in different ways from different perspectives.
American
Institute of Certified Public Accountants defined accounting as “the art of
recording, classifying and summarizing in a significant manner and in terms of
money, transactions and events which are in part at least of a financial
character, and interpreting the result thereof ”.
Frank Wood
(1995: 181) defined accounting as “the process of identifying, measuring, and
communicating economic information to permit informed judgements and decisions
by users of the information”.
The definition
of accounting, therefore, is the process of identifying, recording, analysis,
classifying, summarizing, interpreting and communicating financial data of an
organization to enable users make assessments and decision.
Accounting acts as the language of
business. It communicates in accounting terms, what should be paid to a
supplier or by a customer, the prices for a product or service the value of an
asset. It looks back at the past to record, analyze and report as a steward and
also looks into future and assists management with decision making and control.
Book-Keeping is
also defined by different people in different ways from different perspectives.
Frank Wood
(1995: 181) defined Book-Keeping as “being concerned with the work of entering
information into accounting records and afterwards maintaining such records
properly”.
Book-Keeping is
an integral part of accounting. It is defined as the art of recording financial
transaction in such a manner that the financial position of a business can be
known at any time. What we are saying here, is that whenever a financial
transaction takes place, there must be a proper recording of such transaction
in order to reflect the dual aspect of a transaction i.e. the giving aspect and
the receiving aspect. It is the recording aspect of a transaction that is
referred to a double entry book-keeping.
1.2 IMPORTANCE
OF ACCOUNTING AND BOOK-KEEPING
The following are the importance of
accounting and book-keeping:
i.
It helps to determine the
profitability of a business concern.
ii.
The assets and liabilities of a
business are shown.
iii.
The records show the income and
expenditure.
iv.
The records are used by the tax
department for tax assessments.
v.
The records provide a means by
which the finances of a business are controlled.
vi.
Book-Keeping provides permanent
records for all financial transactions.
1.3 THE NEED
FOR ACCOUNTING
The need for accounting can be seen from
the following perspectives:
i.
Stewardship Reporting: It is necessary
for the managers to report to the owners of the business on their activities
during the period under review.
ii.
Performance Review: It is natural of
human beings to seek enhancement in their businesses. For example, consider the
case of Agbo Ma Biwon Nigeria Limited
who has the following data:
Years Capital Profit Return on Capital
# # %
2010 27,000 5,400 20
2011 40,500 18,225 45
Here, there is a
relative increase in profit in 2011 and as a result of increase in return on
capital, this mean high performance of the business under review.
iii.
Business Decision Making: Accounting
helps in analyzing complex business decision problems using quantitative
techniques to suit the business environment.
iv.
Statutory Compliance: Companies and
Allied Matters Decree 1990 requires all Limited Liability Companies to keep
accounts of their financial transactions in a specified manner.
v.
Requirement for Lending: Financial
statements are usually demanded before banks give loan.
vi.
Tax Purposes: Government relies on
audited financial statements for determining the taxes payable on the profits
and / or other incomes of an individual or company.
FOR MORE INFORMATION CONTACT PATRIOT ODUNARO B.J. ON 08038454008
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