0
Source documents provide evidence of business transactions and are the basis ofr accounting entries?
Identify and briefly describe the main source documents that a firm is likely to handle.
What else can I help you with?
Which principle of accounting to answer accounting is based on tangible evidence?
the business entity principle
Why source document important to a business or accounts?
The source documents upon which the accounts are prepared will be evidence that the accounts for the business have been correctly prepared.
How does an accountant help in planning and controlling a large commercial organization?
The functions of accounting can be enumerated as follows : (i) Maintenance of business records. All financial transactions are recorded in a systematic manner in books of accounts so that there is no need to rely on memory. It is not possible for any human being to remember all what happened in daily operations of a business. (ii) Preparation of financial statements. Systematic records enable the accountant to prepare the financial statements-trading and profit and loss account to calculate profit or loss during a particular accounting period and balance sheet to state the financial position of the business on a particular date. Profit is a measure of the successful running of thel business. (iii) Comparison of results. Systematic maintenance of business records enables the accountant to compare profit of one year with those of earlier years to know the significant facts about the changes. This helps the business to plan its future affairs accordingly. (iv) Decision-making. For day-to-day solving of a number of problems like what should be the selling price of goods produced? Whether a part should be made in the factory or purchased from outside? etc., the accountant helps the management by providing the relevant information. (v) Good evidence in courts. Records of business transactions are treated as satisfactory evidence in courts of law. (vi) Planning and control operations. Planning operations like sales, production, cash requirements for next accounting periods are achieved with the help of accounting information and estimates based on that information. Management is also interested in observing that the operations in the business are going on according to plan and all the departments are spending within their prescribed limits. (vii) Provides information to interested groups. Various interested parties ar groups like owners, creditors, management, employees, government, consumers, creditors are interested in accounting information related to various aspects, viz., sales, production, profits, etc. Accounting provides suitable information to such interested parties. (viii) Taxation problems. In settlement of taxation matters, systematic maintenance of records is a big help. (ix) Valuation of business. Accounting records kept in a proper way enable a business unit to determine the purchase or sale price in a simple manner. (x) An insolvent person is able to explain the past transactions without difficulty if proper accounting records are maintained.
What are GAAPs?
© Business Entity Concept Accounting records be kept separate to owners records, other business etc. © The Continuing Concern Concept A business will continue to operate unless it is known that it will not. © The Principle of Conservatism All records must be fair and reasonable. © The Objectivity Principle Recorded on the basis of objective evidence. Objective evidence means anyone looking at the evidence will arrive at the same answer. © Revenue Recognition Convention States that revenue is recorded in the accounts at the same time the transaction is completed. © Time Period Concept Provides that accounting take place over the fiscal periods. © The matching Principle An extension of revenue recognition. Each expense item related to revenue earned must be recorded in the same accounting period as the revenue it helped to earn. © The Cost Principle The accounting for purchases must be at the cost price to the purchaser. © The Consistency Principle Business must use the same accounting methods and procedures from period to period. © The Materiality Principle The materiality principle requires accountants to follow generally accepted accounting principles except when to do so would be expensive or difficult. © The Full Disclosure Principle States that all the information needed for a full understanding of a company's financial statements must be included.
What are the Advantages and limitation of financial accounting?
Accounting has many advantages: Provides financial information about the business Provides assistance to management Helps in comparison of financial results comparison of its own results of different years comparison of financial results with other firms in the industry Helps in decision making Accounting information can be used as an evidence in legal matters Helps in valuation of the business Following are the limitations: Financial accounting permits alternative treatmentsAccounting is based on concepts and it follows " generally accepted principles" but there exist more than one principle for the treatment of any one item. This permits alternative treatments with in the framework of generally accepted principles. For example, the closing stock of a business may be valued by anyone of the following methods: FIFO (First-in- First-out), LIFO (Last-in-First-out), Average Price, Standard Price etc., but the results are not comparable. Financial accounting does not provide timely information It is not a limitation when high powered software application like HiTech Financial Accenting are used to keep online and concurrent accounts where the balance sheet is made available almost instantaneously. However, manual accounting does have this shortcoming. Financial accounting is designed to supply information in the form of statements (Balance Sheet and Profit and Loss Account) for a period normally one year. So the information is, at best, of historical interest and only 'post-mortem' analysis of the past can be conducted. The business requires timely information at frequent intervals to enable the management to plan and take corrective action. For example, if a business has budgeted that during the current year sales should be $ 12,00,000 then it requires information whether the sales in the first month of the year amounted to $ 10,00,000 or less or more? Traditionally, financial accounting is not supposed to supply information at shorter interval less than one year. With the advent of computerized accounting now a software like HiTech Financial Accounting displays monthly profit and loss account and balance sheet to overcome this limitation. Financial accounting is influenced by personal judgments'Convention of objectivity' is respected in accounting but to record certain events estimates have to be made which requires personal judgment. It is very difficult to expect accuracy in future estimates and objectivity suffers. For example, in order to determine the amount of depreciation to be charged every year for the use of fixed asset it is required estimation and the income disclosed by accounting is not authoritative but 'approximation'. Financial accounting ignores important non-monetary information Financial accounting does not consider those transactions of non- monetary in nature. For example, extent of competition faced by the business, technical innovations possessed by the business, loyalty and efficiency of the employees; changes in the value of money etc. are the important matters in which management of the business is highly interested but accounting is not tailored to take note of such matters. Thus any user of financial information is, naturally, deprived of vital information which is of non-monetary character. In modern times a good accounting software with MIS and CRM can be most useful to overcome this limitation partially. Financial Accounting does not provide detailed analysis The information supplied by the financial accounting is in reality aggregates of the financial transactions during the course of the year. Of course, it enables to study the overall results of the business the information is required regarding the cost, revenue and profit of each product but financial accounting does not provide such detailed information product- wise. For example, if business has earned a total profit of say, $ 5,00,000 during the accounting year and it sells three products namely petrol. diesel and mobile oil and wants to know profit earned by each product Financial accounting is not likely to help him unless he uses a computerized accounting system capable of handling such complex queries. Many reports in a computer accounting software like HiTech Financial Accounting which are explained with graphs and customized reports as per need of the business overcome this limitation. Financial Accounting does not disclose the present value of the business In financial accounting the position of the business as on a particular date is shown by a statement known as 'Balance Sheet'. In Balance Sheet the assets are shown on the basis of "Continuing Entity Concept. Thus it is presumed that business has relatively longer life and will continue to exist indefinitely, hence the asset values are 'going concern values.' The 'realized value' of each asset if sold to-day can't be known by studying the balance sheet.
Which principle of accounting to answer accounting is based on tangible evidence?
the business entity principle
Accounting is the debit notes are legal documents?
Nn, but it may be used as evidence of a contract of sale
What are the uses of financial accounting?
Financial accounting plays important and useful role by developing the information for providing answers to many questions faced by the users of accounting information.Besides, accounting is also useful in the following respects:-(1) Increased volume of business results in large number of transactions and no businessman can remember everything. Financialaccounting firms records obviate the necessity of remembering various transactions.(2) Accounting record, prepared on the basis of uniform practices.(3) Cocooning records, backed up by proper and authenticated vouchers are good evidence in a court of law.(4) If a business is to be sold as a going concern then the values of different assets as shown by the balance sheet helps in bargaining proper price for the business.(5) Taxation authorities (both income tax and sales tax) are likely to believe the facts contained in the set of financial & managerial accounting books if maintained according to generally accepted accounting principles.
Why source document important to a business or accounts?
The source documents upon which the accounts are prepared will be evidence that the accounts for the business have been correctly prepared.
When is a court required to use long arm jurisdiction?
For a court to have personal jurisdiction there has to be actual business transactions in the state with evidence that residents are targeted.
What is the records management definition of a record?
information created or received and maintained as evidence by an organisation or person in pursuance of their legal obligations or in the transactions of business.
Explain and demonstrate understanding of source documents?
Source documents are original records that provide evidence of business transactions. Examples include invoices, receipts, purchase orders, and bank statements. Understanding source documents involves being able to identify, analyze, and interpret the information they contain to ensure accurate financial reporting and decision-making. For example, analyzing an invoice for a purchase can help determine the amount owed to a supplier and verify the goods received.
What is the difference between archives and records?
Archives are historical documents that have enduring value and are preserved for research and reference purposes, usually by institutions like libraries or museums. Records are documents created or received in the course of everyday business activities, providing evidence of transactions, decisions, or activities. Archives are typically a subset of records that have been selected for permanent preservation.
What are the differences between records and documents?
National Archive of Scotland website: A document is any piece of written information in any form, produced or received by an organisation or person. It can include databases, website, email messages, word and excel files, letters, and memos. Some of these documents will be ephemeral or of very short-term value and should never end up in a records management system (such as invitations to lunch). Some documents will need to be kept as evidence of business transactions, routine activities or as a result of legal obligations, such as policy documents. These should be placed into an official filing system and at this point, they become official records. In other words, all records start off as documents, but not all documents will ultimately become records.
What source documents is the purchases returns day book written up?
The purchases returns day book is written up using source documents such as supplier credit notes, purchase return slips, or any documentation provided by the supplier when returning purchased goods. These documents serve as evidence of the return of goods and help in recording the transactions accurately.
What is substantive evidence?
documents or witnesses that can verify the evidence or evidence on which reliance can be placed for the decision of the case.
What is the difference between forensic accounting and regular accounting?
Forensic accounting applies accounting principles and financial analysis to uncover, detect, and prevent fraud or any other malicious activity. It is unique from regular accounting in that it involves a deep dive into the financials to identify evidence of any suspicious activity that could result in legal implications. Protect your business and investments by understanding fraud investigation and implementing its principles into your organization’s internal controls. Take control of your business’s future with NSKT Global! Learn more about this specialized type of accounting today.
