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Showing posts from April, 2016

Ethics in Accounting

The nature of accounting establishes a unique position of trust in relation to the clients, employers and general public, who count on accountants' professional judgment and advice in making financial/managerial decisions.'They have the responsibility to ensure that their duties are performed in conformity with the ethical values of honesty, integrity, objectivity, due care, confidentiality, and the commitment to the public interest before one’s own. Theories of ethics 1.  Utilitarianism Jeremy Bentham is the founder of utilitarianism. 'The doctrine that an action is right in so far as it promotes happiness, and that the greatest happiness of the greatest number should be the guiding principle of conduct.' Jeremy Bentham, the founder of the idea, argues that the more happiness there are in the decision, the better decision it is. However, happiness is an unquantifiable concept. John Stuart Mill supported the idea of utilitarianism but he developed an idea into ...

Understanding Accounting.

Accounting Philosophy.  The philosophy of accounting is the conceptual framework for the professional preparation and auditing of financial statements and accounts. The issues which arise include the difficulty of establishing a true and fair value of an enterprise and its assets; the moral basis of disclosure and discretion; the standards and laws required to satisfy the political needs of investors, employees and other stakeholders. The discipline of accounting insists that transparency is achievable. Fairness has an important role in the practice of accounting. Accordingly, it seems appropriate that philosophy as a relevant way of understanding truth and fairness in accounting is well considered. Some authors have already underlined the key role played by philosophy in accounting such as social justice, ethical conscience, economic entitlement etc. Thus concepts like fairness, justice, equity, and truth have a due place in accounting. Preamble  Often, accountants are ...

Generally Accepted Accounting Principles

Generally accepted accounting principles (GAAP) are the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or standard accounting practice. These include the standards, conventions, and rules that accountants follow in recording and summarizing and in the preparation of financial statements. Many businesses choose to "opt out" of GAAP practices as they operate on a cash basis, as opposed to an accrual basis. A comparison would be the way that most people balance their checkbooks: when a check is written, its amount is deducted from the total balance even though the funds have not yet left the account. Financial decisions made after the check is written are based on the balance after the check is deducted.

Practice of Accounting in Nigeria.

The key role players in the practice of accounting in Nigeria are those organizations that are saddled with the responsibility of providing established rules and standards in the preparation of corporate financial statements, its audit and investigation. In general, the accounting profession and the Federal Government of Nigeria have always been entwined. Before Nigeria gained political independence in 1960, it had no registered body for professional accountants. The development of the accounting profession in Nigeria became feasible only with the movement towards political independence in the country. Comparatively, however, the accounting profession lagged behind most other professions in Nigeria. It was, for instance, observed that: Although clergymen, lawyers and doctors have been recognized as professionals in Lagos as far back as the later part of the nineteenth century… accountants were not so recognized because the handful of this group of skilled practitioners at that time...

Double-entry Bookkeeping

When medieval Europe moved towards a monetary economy in the 13th century, sedentary merchants depended on bookkeeping to oversee multiple simultaneous transactions financed by bank loans. One important breakthrough took place around that time: the introduction of double-entry bookkeeping, which is defined[by whom?] as any bookkeeping system in which there was a debit and credit entry for each transaction, or for which the majority of transactions were intended to be of this form. The historical origin of the use of the words "debit" and "credit" in accounting goes back to the days of single-entry bookkeeping, which had as its chief objective keeping track of amounts owed by customers (debtors) and amounts owed to creditors. Debit in Latin means "he owes" and credit in Latin means "he trusts". The earliest extant evidence of full double-entry bookkeeping appears in the Farolfi ledger of 1299-1300. Giovanno Farolfi & Company, a firm of Flor...

History of Modern Professional Accounting.

The modern profession of the chartered accountant originated in Scotland in the nineteenth century. During this time, accountants often belonged to the same associations as solicitors, and the latter solicitors sometimes offered accounting services to their clients. Early modern accounting had similarities to today's forensic accounting: "Like forensic accountants today, accountants then incorporated the duties of expert financial witnesses into their general services rendered. An 1824 circular announcing the accounting practice of one James McClelland of Glasgow promises he will make “statements for laying before arbiters, courts or council.” In July 1854 The Institute of Accountants in Glasgow petitioned Queen Victoria for a Royal Charter. The Petition, signed by 49 Glasgow accountants, argued that the profession of accountancy had long existed in Scotland as a distinct profession of great respectability, and that although the number of practitioners had been originally f...

Early Development of Accounting.

Accounting records dating back more than 7,000 years have been found in Mesopotamia, and documents from ancient Mesopotamia show lists of expenditures, and goods received and traded. The development of accounting, along with that of money and numbers, may be related to the taxation and trading activities of temples: "another part of the explanation as to why accounting employs the numerical metaphor is that money, numbers and accounting are interrelated and, perhaps, inseparable in their origins: all emerged in the context of controlling goods, stocks and transactions in the temple economy of Mesopotamia." The early development of accounting was closely related to developments in writing, counting, and money. In particular, there is evidence that a key step in the development of counting—the transition from concrete to abstract counting—was related to the early development of accounting and money and took place in Mesopotamia. Other early accounting records were also fo...

Brief History of Accounting or Accountancy.

The history of accounting or accountancy is thousands of years old and can be traced to ancient civilizations. The early development of accounting dates back to ancient Mesopotamia, and is closely related to developments in writing, counting and money and early auditing systems by the ancient Egyptians and Babylonians. By the time of the Emperor Augustus, the Roman government had access to detailed financial information. According to some Indian scriptures, the Indian Chanakya wrote a manuscript similar to a financial management book, during the period of the Mauryan Empire. His book "Arthashasthra" contains few detailed aspects of maintaining books of accounts for a Sovereign State. The Italian Luca Pacioli, recognized as The Father of accounting and bookeeping was the first person to publish a work on double-entry bookkeeping, and introduced the field in Europe. Accounting began to transition into an organized profession in the nineteenth century, with local professio...