Stages of the evolution of accounting and the emergence of management accounting

There are three stages Tmrahlt where management accounting can be summarized in the following points:

1. Development of Italian priest Loja Batchelio theory of double-entry in the century 14 century and thus emerged of accounting.
2. Appeared aware of the review for the emergence of the need to prepare financial statements to assist in decision-making as well as state intervention in business activity.
3. At the end of the century (19) and the beginning of the century (20) and with the occurrence of the Industrial Revolution appeared aware of cost accounting, with the development of management and increase their problems and their need for data and information to assist in the rationalization of its back knowledge management accounting.

Government Accounting

Is a branch of accounting and deals with the study principles governing the operations of appreciation, registration and accounting report on the activities carried out by the government. It is a tool for managers of government control over revenues and expenditures for the various ministries and units, known as the State budget. They estimated the numbers of approved expenses and revenues of the State for a certain period to come is usually a year. Include all public expenditure, which allows the government to spending it in various areas of public services, security and defense, justice, and productive projects.

Keep abreast of developments in the laws of Accounting and Tax

I met him accidentally at a customer and I do the accounts for the processing of program they have, gray hair is ..
And has passed sixty Oawamh no doubt ..
Governing the tie until the most recent, and puts in the pocket of his shirt in the order of severe group of pens of different colors ..
Looked at me critical and I do I navigate between screens the program trying to get the job done as soon and hinted his view of looming from behind his glasses thick Ermq my fingers a click buttons to the keyboard, like one of the priests of the Middle Ages and had started to think of the decision Bihraci alive, accusing the Exercise of things magic ..
"I do not believe in this thing" ..
Spoken like a tennis ball hit towards me waiting for me to respond ..
I looked at him and tried to draw a smile on my face:
- Do you mean the computer or accounting software?
Appeared on the point of satisfaction when you led me to where he was completely Wants to be optimistic in subtle, he says:
- Both .. I work in the field of audit since 1970, and not resort to those things never
- I think that the computer will not have developed enough for such uses in 1970.
- Maybe .. But I met a lot of software designers in companies that I reviewed over many years, and no one could convince me of the importance of these programs .. I do not even use the calculator in the operations of addition and subtraction.
Not much I'd try to convince him, but it seemed to me that it Alsmajp to stop the dialogue at this point and come back to resume my work without a response ..
- I can tell you that part of the importance of such programs, and probably won it for your interest.
Looked at me as if to say (what you have Red Hat) so I went back complete my words:
- At the outset provides you with an automated system an easy way for the entry rather than dealing with those notebooks large, multi, also provides you with some sort of adequate security the possibility of creating backup copies of the database and saved on a multi-media so as to ensure that they would not be damaged, as happens to the books of paper in some cases, After that the system provides the user think in many of the accounting entries, where the system automatically created with the documents and thus saves time and effort and the prospects for the introduction of restrictions or amounts incorrectly.
He nodded and stretch his lips in a non-conviction or threat of trying to pretend so I told him nothing could provoke admiration in the system:
- I for example can tell you one of the things that I see the advantages of such systems, namely, to help users keep abreast of developments in accounting standards, for example, when it was issued financial statements indicative with accounting standards issued by the Ministry of Economy, was obliged companies to contribute to the issuance of the balance sheet and income statement as provided for by the standardized format for the list, you find a lot of accountants can not even understand that the new names were added, such as working capital and total investment, let alone the process of preparation ..
He said in an exclamation point and the very tone I could not distinguish its meaning in this moment:
- Can these programs from the issuance of financial statements in that form?
- Sure, you can extract the financial statements as provided for and that fits the nature of the activity which the firm operates as well.
I said, thinking that he must Sionnbhr But what happened was quite unlike what I expected it buried his face in the papers in front of him in rage, he says in a sharp tone:
- I do not believe that the new menus anyway .. Since 1970, we are preparing lists the usual form, which we have learned from the geniuses of accounting that makes us what we resort to those forms which have no meaning ..
Only here you have understood and decided to smile and a complacent face to return to a preoccupation in my work .. This man does not enter into in order to knowledge, but just another one of those who are not thinking in the development and look at all that may lead them to change their ideas part of the antique look hostility, shouting "you Pachtraatkm us, let us not allow our lives as they are in peace."



I after all the novel to speak on the subject of the development of accounting software with the development of thought in accounting and accounting laws and taxes ..
It was probably this is one of important criteria according to which accountants in the knowledge of a quality systems, accounting programs are usually designed to have long periods of time ago and must have been designed in the light of a series of laws that may have remained the same or changed in whole or in part ..
And the advantage of good software that changes could be adapted without problems to the users especially users who have old databases and may have been the thousands of entries in a certain way and can not in any way change or re-enter it again.
Must therefore accountant before hiring the new system for his company that scans a full needs of accounting, tax and ensure their availability in the program first and then ask an advisory system on how to work those parts and get answers enough about the flexibility and the possibility to modify with any development in the laws of accounting and tax.
For example, are some of the programs calculate the income tax on salaries automatically as it was stipulated in the tax laws past and when to change the tax law in the current year and the experience of these programs a big problem in the amendment at the heart of the program itself, and the programs that the advantage of design flexibility, she prefers to keep these parts far for the system design itself, but extensions are designed for a small programs that are highly complex operations and can be modified at any time to suit the change in the methods of work within companies and any changes in laws account without entering into amendments within the program itself.
It is also important for companies to know the extent of development of the program during the periods prior to the knowledge of the company's plans produced in the development, where the standard is currently in the trade-offs between programs depends not only on product quality and relevance to the current needs, but the attention of the producers of these programs develop, modify and add improvements , and suitability for the growth and development in the activity and the constant amendments in the laws.
The bottom line is that the continuous development has become the most important specifications that must be met in the programs of Business Administration who does not prepare itself sufficient to meet those changes that occur constantly and continuously for the improvement becomes like a vintage car amid a race contested by the latest cars, but that analogy may do harm antique car that you may find them used last as an impact, but the business world it has no implications for museums, especially if those things associated with success and improve and continue in the business world.

Financial statements according to International Accounting Standards

Some still insist on the use of the budget in shape, which resembles the famous (T-English), where he represented the government balance between assets on the left side and liabilities and property rights in the left side ..
However, the international accounting standards required the display of specific elements of a minimum budget (balance sheet), has started many countries including Egypt, to abide by those standards, included the Minister of Economy No. (503) for the year 1997 models of the balance sheet in its modern form which is consistent with the disclosure requirements Incoming international accounting standards.
The list was tabulated elements in its financial position (vertical) New to the following order:

1. Fixed assets
2. Current assets
3. Current Liabilities
4. Property rights
5. Long-term liabilities




The identification of assets and current liabilities of the important sources of information that will help users of financial statements when their analysis of the financial position of the facility, called the difference between current assets and current liabilities term "net current assets" or "working capital"
And is classified assets and liabilities to current and non-current selecting assets and liabilities of the facility that revolves continuously in the framework of the operating cycle Regular, based on this tab to whether the terms of the assets have been exhausted and the terms of the obligations are settled through the process of generating revenue during the session of the normal operating of the facility, usually represent the average period elapse between the acquisition of raw materials that go into operating cash flow and check the final installation.
Items of current assets:
Must include the following items are included within current assets:

* Cash balances held in the facility and available to banks and to the requirements of the current operation
* Securities that have the purpose of acquisition of trading operations
* Balances owed by clients and debtors Almtnoon
* Stock
* Prepayments for the purchase of assets traded
* Prepaid expenses expected to use or depletion within one year from the balance sheet date

Items of current liabilities:
Include commitments traded those obligations that mature at the request of the creditors, as well as what is expected of paid or settled within one year from the balance sheet date according to the following:

* Bank loans
* Parts of the current outstanding long-term liabilities
* Balances owed to creditors of the activity as well as accrued expenses
* Custom taxes and provision for disputed tax claims outstanding
* Dividends payable dividend or creditors.
* Deferred revenue and advances from customers.
* Receivables to meet potential liabilities.

Beneficiaries of the accounting information

Beneficiaries of the accounting information



Beneficiaries of the accounting information
Can be classified as users of financial information prepared by the accountant in the form of reports by source of economic interest in the facility ..


1) the owners of the facility.
2) managing the business.
3) creditors.
4) Investors
5) government
6) staff.
7) firm's clients.
8) the general public.

1) owners of the business: The economic entity may be an individual firm or company of persons (Solidarity), or joint stock company, or facility may be a non-profit (charitable and government facilities), and in all these forms there are, interested in matters of this facility can not identify to their conditions and verify that they are moving towards achieving its objectives only to the availability of accounting information.

2) management of the establishment: It is difficult to manage the facility to do its job properly if you do not groove well conversant with the affairs of the facility, if the size of a large economic entity to the extent that his administration is not able to follow the activities of the business easily, it is essential to follow-through reports , and appropriate reporting is only available if an effective system of information, and accounting system is part of the information system at the facility.

3) Creditors: It is known that the most important sources for the financing of the facility: the owners and creditors.
And creditors must either be a financial facilities such as banks and investment companies, or who sold goods on credit facility for resale or fixed assets.
And since the deal on credit or lending is based on confidence in the debtor or the borrower, and the source of this confidence can be either:

If the project is an individual or a company ? - The same owner solidarity.
Including income derived from the future, and including under the hand of his administration  b? - The project itself and the means of production as well as reputation management.

And therefore often are financial reports prepared by the facility at the end of the accounting period is the source of this information.

4) Investors: understood to mean here those who have money want to invest in an existing project or a new project, and the investor will not make an investment decision only after the availability of adequate information about investing in it, not only on the same project, but rather for investment projects of alternative until the comparison.

5) government: working in the vicinity of established economic systems is governed and supervised by government agencies, as well as some of the establishments participating in the state and society in the form of income taxes and Zakat, as some of the other economic institutions receive subsidies from the state, these factors make One of the beneficiaries of the state of accounting information.

And therefore we can divide the parties concerned to follow the conditions of facilities to:
A? - Government agencies directly concerned with financial information such as: Ministry of Commerce of taxes and Zakat.  represented in the Department of Zakat and income

General Auditing Bureau, and for the following reasons:

1. Control of state revenues collected from the establishments in the form of taxes and zakat.
2. Follow-up expenses in the form of state subsidies for economic enterprise.
3. Control of economic institutions that the state has something of its shares or contribute capital.
B? - Government agencies concerned with the indirect financial information such as: Ministry of Finance - Department of Statistics - and the Ministry of Planning.


6) Employees: keen employee in the establishment of economic to continue his job, which represents a source of income, the source of increasing this income, and improved his position by gradually up the career ladder in its business, and this can only happen in an enterprise successful; so the staff member directly involved in knowledge of business and financial conditions of the facility, this knowledge does not come only through financial information.

7) firm's clients: economic institutions depend on each other, some produce to sell to other firms sell to the consumer.
Also, some establishments produce goods sold to other facilities is for her raw materials are manufactured and sold ready-made products.
And often follows this dependence is an overlap of interest in the sale on credit or in the accounting of the conditions of facilities that buy them .. The strength of the resource and the stability of its financial position and business will prove convenient to the client regarding the sources of supply.

8) the general public: is intended to deal with the financial information for any other purpose, such as universities represented by its students and professors, and research centers and consulting offices, centers, and compiling financial information.

Stores Accounting

Stores Accounting



Branches of accounting:

1 - Financial Accounting.

2 - cost accounting.

3 - Management Accounting

4 - Zakat Accounting and Tax

5 - Government Accounting

Financial Accounting:

Is one of the branches of accountability means documenting and financial data processing and delivery to the beneficiaries in the form of financial reports prepared in accordance with agreed criteria for use in decision-making.

Cost Accounting: A branch of the accounting means compilation and processing of financial information to gain access to the cost of production, either in total or in units of its units, and used in planning and internal control and financial reporting to management or to outside parties.

Management Accounting: Accounting is linked to the branches of a financial accounting and cost accounting and focus on the analysis of information derived from the accounting system and put it in the form of management can act in light of a clear vision, and allows them to follow the course of events and to judge the conduct of the business.

Zakat Accounting and Taxes: It means compiling and processing of financial information to gain access to the amount subject to Zakat, or the amount of taxable and is what is known (and tax base or zakat), and set up the Adoption of the Zakat or tax return for access to the amount of zakat or tax to be paid to the Department of Zakat and income.

Government Accounting: The branch of accounting and dealing with collection and processing of information and documentation relating to expenditures and government revenues to make sure to set the public funds and control them and use them optimally.

Review:

If it were not a branch of accounting, but it is in this context; Valemradjap concerned with examining all or some parts of the accounting system to achieve two objectives, one external and one internal.



External Audit (legal review): interested in examining all or some parts of the accounting system to give confidence to the financial reports prepared by the system in accordance with auditing standards agreed upon, and the results of that report or certificate from the Statutory Auditor to be attached to the financial statements and published them.



Internal Audit: scan all or some parts of the accounting system to ensure integrity, and in order that the Administration ensure that the system is going as planned and it serves the purposes for which management aims to achieve it.

Attempts to develop accounting standards at the international level

Attempts to develop accounting standards at the international level



Began growing interest in the development of accounting rules by professional bodies since the beginning of the second half of the last century where there was no scientific common rules are being applied by practitioners of the accounting profession and every body was in all industrialized nations put their own accounting rules, which it considers consistent with accounting concepts.

And has remained the term generally accepted accounting rules as an expression of art when the accountants and auditors concept includes everything that is agreed upon in the science of accounting and accepted by the companies and institutions, even if different in addressing the same subject.

Standards can be defined as models or instructions for general guidance and lead to the rationalization of practice in accounting, auditing or audit.

Thus, different standards for Standards procedures have the status of general guidance or direction while dealing with the actions of the Executive version of these standards applied to specific cases.

The importance of accounting and auditing standards made of professional organizations in many countries around the world interested in developing standards, and perhaps the most important of these organizations in this area complex of Chartered Accountants in the United States of America AICPA initiated to develop criteria for audit since 1939 has been formed body or the Council for Accounting Standards Financial FASB in the United States of America since 1973, such as developing a formula generally accepted accounting principles GAAP, which came into force since 1932.

Attempts to set standards at the international level began with the beginnings of this century and began to hold conferences of the International Accounting and will show the most important are as follows:
1 - The First International Accounting Conference held in 1904 in St. Louis, Missouri in the United States of America under the auspices of the Federation of Associations of Chartered Accountants of America before the founding of the American Academy of Accountants in 1917 There has been research in this conference about the possibility of unification of law among nations accounting



2 - IAS Conference 1926 in Amsterdam.



3 - Third International Conference on Accounting 1929 in New York

The submission of the three research head, namely:

- Consumption and the investor.

- Consumption and re-evaluation.

- Natural or commercial year.



4 - The Fourth International Conference on Accounting 1933 in London

The 49 organizations participated in an accounting of 90 delegates appointed by the addition to the presence of 79 visitors from abroad has reached the number of countries represented at the Conference 22 countries including Australia, New Zealand and some African countries.



5 - Fifth International Accounting Conference 1938 in Berlin

With the participation of 320 delegations, as well as 250 participants from the rest of the world



6 - Sixth International Conference on Accounting 1952 in London

Register at the conference where 2510 members, including 1450 of the organizations that sponsored the conference in Britain and 196 from the Commonwealth and the rest from 22 other nations.



7 - Seventh International Accounting Conference 1957 in Amsterdam

The conference was attended by 104 accounting organizations from 40 countries and was attended by visitors from abroad in 1650 and 1200 a member of the host country the Netherlands.



8 - Eighth International Conference on Accounting, 1962 in New York

It was attended by 1627 members of the United States to 2101 as well as from other countries and was attended by 83 organizations representing 48 countries where 45 feet was discussed.



9 - the Ninth International Conference on Accounting, 1967 in Paris


10 - Tenth International Conference on Accounting 1972

Attended by 4347 delegates from 59 countries.



11 - Conference on International Accounting atheist tenth 1977 in Munich, Germany.

It was attended by delegates from more than one hundred countries in the world



12 - Conference on International Accounting XII 1982 in Mexico.


13 - Conference on International Accounting XIII 1987 in Tokyo.


14 - Conference on International Accounting XIV 1992 in the United States.

The conference theme was the role of accountants in the global economy, in which around 106 accountancy bodies from 78 countries and was attended by about 2600 delegates from around the world, was not lost on Arab participation for the conference represented by delegations from Lebanon, Syria, Kuwait, Egypt and Saudi Arabia under the auspices of the International Federation of Accountants IFAC where hosted three American accounting organizations are complex Accountants AICPA and the American Society of Management Accountants IMA and the Association of Auditors entrants IIA.



15 - Conference on International Accounting XV 1997 in Mexico.


16 - Accounting Conference XVI International 2002 in Hong Kong.

Where they discussed about ninety (90) address topics ranging from hot dialogues such as inclusiveness and ethics to the impact of the knowledge economy on the accounting profession.


17 - Conference XVII International Accounting 2006 in Istanbul.

Was held under the banner of growth and global economic stability, and the contribution of accounting in developing nations, and the stability of capital markets around the world. And the role of accountants in the assessment process in the projects.
The outcome of these conferences that were a result of mounting pressure from users of financial statements of shareholders, investors, creditors, unions and trade associations, international organizations, governmental associations and government agencies for the formation of several organizations aimed at development of international standards and to create the climate necessary for the application of these standards

Development organizations, international accounting standards

Development organizations, international accounting standards

There are several organizations aimed at development of international standards and to create the climate necessary for the application of these standards and most important of these organizations:



First: the International Federation of Accountants IFAC.

Second: The International Accounting Standards Committee IASC.

Third: The Committee on the Exercise of the international scrutiny of IAPC.



International Federation of Accountants (IFAC)

A global organization of the accounting profession was founded in 1977, its membership includes 155 member organizations in 118 countries, representing more than (2.5) two and a half million accountants.

The Union aims to strengthen the accounting profession in the world and contribute to the development of a strong international economy through the establishment of professional standards and high level to encourage adoption. To achieve its functions. The Union has a close working relationship with bodies and organizations of accounting associates in various countries around the world.

The committees of the Union has developed the following criteria:

- International standards for review and confirmation services.

- International standards for quality control.

- International rules of ethics.

- International qualification standards.

- International Accounting Standards in the public sector.

The union membership in some of the accounting bodies in some Arab countries such as Bahrain, Egypt, Iraq, Lebanon, Morocco, Saudi Arabia and Tunisia.




And implement the Programme of Action of the Union before the following committees:

1 - Education Committee:

And set standards of education and training qualification required to practice the audit (legal accountability) as well as continuing professional education for members of the profession on the Committee's statements be subject to the approval of the Council.

2 - Professional Conduct Committee:

And set standards of professional ethics and enhance their value and accepted by the member organizations with the consent of the Federation Council.

3 - the Committee on Accounting and Financial Management:

Working on the development of financial accounting and management by creating the environment that increase the level of efficiency of management accountants in society in general, and render the necessary data directly on behalf of the Federation Council.
4 - Public Sector Committee:

And develop standards and programs aimed at improving the financial management of the public sector and its accounting

Union membership

n Member of the International Federation of Accountants open to accountancy bodies recognized by law or by virtue of consensus in their home countries as organizations of the importance of a good reputation in the accounting profession. Include membership in the International Federation of Accountants Member of the Committee on International Accounting Standards. The number of accountants in the member organizations of the International Federation of Accountants almost 2.000.000 accountant in professional work and private education and government.





(Commission) International Accounting Standards Board

06/29/1973 Founded in the International Accounting Standards Committee (IASC), following an agreement between the associations and professional institutes in the leading (Australia, Canada, France, Germany, Japan, Mexico, Howlandp, United Kingdom, Ireland, USA) and the objective was to The Committee shall prepare and publish accounting standards and to support the acceptance and adherence to and strengthening the relationship between them and the International Federation of Accountants (IFAC). And considered the Accounting Standards Committee formed after the civil liability and issued statements on behalf of the assets of international accounting.

And has acquired the International Accounting Standards Committee widely recognized its competence and joined by a large number of professional associations in most countries of the world, whether Europe or Asia or elsewhere, which led in 1982 to join all the professional accountancy bodies, which was a member of the International Federation of Accountants ((which was comprising two hundred professional body around the world)) to the International Accounting Standards Committee, where the issuance of 41 accounting standard internationally.

In 2000, the restructuring of the Standards Committee and the Statute of them and was named International Accounting Standards Board (IASB), which was considered, starting from April 2001 is responsible for issuing international accounting standards instead of the Standards Committee as adopted by this Council all accounting standards issued by the Standards Committee International
As the Board in 2002 to re-label ((Commission interpretations)) (SIC) and switch the label to the ((committee interpretations of international standards for the preparation of financial reports)) (IFRIC) aims to explain and clarify the accounting standards existing in addition to providing instructions and guidance permanently on the existing international accounting standards and on the International Financial Reporting Standards.





International Accounting Standards Board IASB

After about 25 years from the beginning in the development of standards, there is a need to change the structure of the Commission. The new format is

International Accounting Standards Board IASB, which has the responsibility for the development of International Financial Reporting Standards.

- Council was formed in 2001 to replace

- Replaced the Commission

- International Accounting Standards.

The application of international accounting standards in the world

The application of international accounting standards in the world







In most European countries and through professional bodies working there, and through efforts made by the Commission on international standards recommended by the International Organization for guarantees (ISOCO) in Europe that are using international accounting standards as recommended by the Advisory Group for the European Financial Reporting (EFRAG) after in-depth studies and negotiations acceptance of international accounting standards and indicated that these standards do not contradict with the standards used in Europe. It was the recommendation of the International Organization for guarantees (ISOCO) and the Consultative Group of the European Financial Reporting (EFRAG) a significant impact in supporting the international accounting standards and their application in Europe.





In the Arab world, we find the following:



In the Arab Republic of Egypt is an Egyptian version of accounting standards keep pace with developments in the Egyptian economy and in accordance with international accounting standards, where the Standing Committee of the Accounting and Auditing Standards to prepare the Egyptian Accounting Standards and has been issued Ministerial Decree No. / 503 / for the year 1997. Despite the naming of these standards on behalf of the Egyptian Accounting Standards, it is a translation as we have almost entirely to international accounting standards. And the dedication to apply international standards indirectly.



And in Saudi Arabia, the Saudi Organization for Certified Public Accountants develop accounting standards are derived from private international accounting standards translated into Arabic, where the standards were adopted for the application by the operating companies.



As for Lebanon, has been the adoption of international accounting standards as a basis for accounting entries and to prepare the data, and financial reporting by institutions and various bodies and companies and has been issued Ministerial Decree No. / 673 / Date June 14, 2001 as the union has an expert accountants certified in Lebanon, the translation of accounting standards International English into Arabic.



In the Hashemite Kingdom of Jordan has been translated international accounting standards by professional bodies to seek to apply to the companies and by those working in the audit and accounts.



In Syria, will be the adoption of international accounting standards in companies that will be recorded in the Damascus Stock Exchange is also now working to amend the uniform accounting system in line with the standards the basic premises of the International Accounting Standards


Accrual basis: financial statements are prepared on the basis of

Entitlement and not a cash basis.

Continuity: The accounting statements are prepared on the assumption that the project is continuing in the foreseeable future, that are disclosed in cases contrary

To that assumption.

Areas of the use of accounting

Areas of the use of accounting

















Accounting used in the various economic units that practice a certain activity in order to achieve a particular goal, regardless of the nature of this activity or legal form for these units, and that the use of accounting and a broad and multi-varies as economic units. And these units can be classified as economic, according to the following:



First: in terms of the nature of the activity:




1 - commercial: Kmencat wholesale and semi-wholesale and retail.



2 - Industrial: as factories that convert various raw materials to finished goods or semi-ready.



3 - extraction: agriculture, mining and petroleum.



4 - Finance: such as banks and insurance companies.



5 - Transportation: such as lines of ground and air and sea.



6 - the liberal professions: lawyers, accountants, engineers and doctors.



7 - Public Utilities: such as electricity, water and telephone.



8 - of non-profit organizations: such as electricity, water and telephone.







Second: In terms of legal form:


1 - individual projects: It includes all projects that are owned and managed by one person, the purchase and sale of goods by himself and is responsible for the project.



2 - businesses of all types: including all enterprises owned by more than one person, whether public or private

The objectives of financial accounting

The objectives of financial accounting

Can be divided to the objectives of financial accounting objectives associated with side Applied and objectives linked to the theoretical side.



A - goals that are related to applied side




1 - providing a complete record of all financial operations of the facility whether they relate to Palmserfat and income or receivables, etc. .......



2 - determine the outcome of the business of the profit or loss during a financial period.



3 - Determine the financial position of the facility at the end of the financial period.







B - basic objectives of the theoretical side of science.


Preparation of periodic reports required for the different administrative levels, which helps in making rational decisions.

Provide data and information that serve the symptoms of external users such as suppliers and lenders

Providing data and information that serves government agencies for taxation purposes in the areas of the preparation of general plans at the state level.

Provide information on the economic resources of the project and obligations as a result of obtaining those resources.

The emergence and development of accounting

The emergence and development of accounting



History and Development of Accounting



Accounting is the language of handling the affairs of life and the language of economic, social and financial as they are the language of business, they are logged on economic relations, financial and social terms of numbers. It is therefore essential for each facility to use accounting information in managing their work and a basis for decision-making and to identify the results of their work, as well as identify the types of investment and sources of funds, the basic function of accounting is to find the record governing the activities of daily economic, expressed in monetary units.



Genesis Accounting



Man knew accounting since the beginning of human civilization, and most studies indicate that more sophisticated accounting systems, the old system was defined by the Pharaohs in Egypt, where he records the accountant used to count the amount of the wealth of kings, emperors and pharaohs.

With the emergence and development of the Islamic state (after the year 600 AD) has developed accounting applications where established government offices and agencies concerned with public money and perhaps the most famous house of money established by the Caliph Omar Bin Al Khattab may Allah be pleased with him, has seen a medieval beginnings of accounting systems to account for assets of the farms owned by the feudal lords in England and recording of expenditures and revenues of those farms.



And until the beginning of the tenth century AD, was the accounting records primitive little more than notes prove the merchants and money-lenders their financial futures with others in order to show the implications of these transactions from the rights and obligations, and cash transactions merchant was evaluated through its control of personal without the need for registration was launched with a number this method in the recording of financial transactions single-term limitation.



The impact of the industrial revolution in the evolution of accounting where it has large-scale projects to replace the individual projects, the need arose to capital to finance large projects and management separated from ownership.

With the development of industrial companies and the emergence of monopolies and joint stock companies and then the multinational corporations and the emergence of giant companies from the industrial, commercial and financial, have developed accounting and numerous branches, means and methods, and found the bodies of the accounting independent has been operating on the development of accounting and conducting research and studies and make recommendations and the development of accounting principles that enable this flag to keep up with all economic developments.



The concept of accounting



The accounting system provides the backdrop to provide accounting information to managers and investors, customers and others through the menus and reports the different accounting and so on, the concept of accountability is a conversion of accounting data (inputs) to the reports and lists of (output), carrying out some operations such as registration and the tab and the summary by using some means to to produce this information.



The use of accounting



Accounting used in the various economic units that practice a certain activity in order to achieve a particular goal, regardless of the nature of this activity or legal form for these units, and that the use of accounting and a broad and multi-varies as economic units. And these units can be classified as economic, according to the following:



First: in terms of the nature of the activity:

1 - commercial: Kmencat wholesale and semi-wholesale and retail.

2 - Industrial: as factories that convert various raw materials to finished goods or semi-ready.

3 - extraction: agriculture, mining and petroleum.

4 - Finance: such as banks and insurance companies.

5 - Transportation: such as lines of ground and air and sea.

6 - the liberal professions: lawyers, accountants, engineers and doctors.

7 - Public Utilities: such as electricity, water and telephone.

8 - of non-profit organizations: such as electricity, water and telephone.

Second: In terms of legal form:

1 - individual projects: It includes all projects that are owned and managed by one person, the purchase and sale of goods by himself and is responsible for the project.

2 - businesses of all types: including all enterprises owned by more than one person, whether public or private.

Assumptions and accounting principles

Assumptions and accounting principles




Accounting assumptions



Adoption of financial accounting on five basic assumptions are:

1. Assuming the unit of accounting: This means the assumption that the project's independent judicial personality and recording financial transactions in the books were mainly associated with these personal, independent, even if possessed by different people or multiple. Based on this assumption the accountant to conduct operations accounting for this project as a separate unit and not the owners of this project is multiplied or Gulwa.

2. Continuity assumption: This means the assumption that the facility and found to continue in the exercise of its ordinary indefinite period of time. This means that revolve balances the current year to the next year ((eg balances customers)).

3. Assuming the unit of measurement: This means the assumption and the existence of a unit of measurement common link between the various processes and activities at the facility and allow for calculations and comparisons. Accounting based on a national currency basis to measure the value of the various events of interest to the accountant.

4. Assumption of the accounting period: returned are limited to one calendar year beginning on 1 / 1 of each year and end on 31/12 for the same year and is measured in profit and financial position as at the end of the accounting or at the end of the year.

5. Assuming the balance accounting: This means the assumption that all the accounting operations launched from a perfect balance between the parties to the constraint accounting party to the debtor and the creditor making the algebraic sum of any accounting entry is equal to zero and must be balanced the budget and the balance of audit and help this purpose, the possibility of detection errors caused by lack of balance.





Accounting principles



1 - the historical cost basis: The historical cost of any out of a purchase plus all expenses paid so that the parent is ready for use.

2 - the principle of Revenue: Revenues realized at sale and are measured in monetary terms and that the production that was not sold during the accounting period is the historical cost price evaluation for the purposes of calculating profit.

3 - the principle of interview expenses income: and this principle is to link the revenue expenditure to be made accessible to the average net profit.

Definition of financial accounting

Definition of financial accounting





Definition of financial accounting:

Accounting is a branch of Administrative Sciences, which means the financial information, and is an accountant who would collect and process such information in ways that art was able to take advantage of his relationship with them, and the final product of these processes are the financial reports.

- Financial Accounting: - is a set of assumptions, rules and scientific principles generally accepted that control the process of recording and tabulating the financial operations of facility specific, depending on a set of documents, books and financial statements in order to determine the outcome of the work and activity of the facility for a certain period and imaging of the financial position at a specified date, The accounting as a means to provide financial information to both management and non-so that they can build upon to take decisions and economic development, and is third in the facility owners, investors, and lenders, and suppliers, and experts from the capital market, financial consulting, and financial analysts, trade unions, chambers of commerce, and various government bodies Kmsalehp taxes. According to the project as Mahasppiadarp in various areas such as assistance in planning and policy-making and identify the financial positions of those who collaborated with the facility and other services and are therefore truly represent - as described by some - the language of business.


And accounting can be defined technically as defined by the American Accounting Association as: the process of identifying and measuring and communicating economic information to enable beneficiaries to act in light of clear vision.

Bank Reconciliation

Bank Reconciliation

Use most of the facilities at the present time to keep their money in banks because of banking services performed by banks to their clients and also to the risks that may be exposed to the facility as a result of keeping their money in the treasury of the risk of theft or embezzlement or other, and therefore the facility you open a current account in the Bank have have the freedom to deposit, withdraw whenever you want according to certain procedures, and retain established a special account the bank has at the end of each financial period is the inventory for cash balances in the bank by the match between the bank account shown on the books of the facility and the balance of the account established in the books of the bank and usually send banks revealed account for the entity describes the operations carried out by the facility of deposits and withdrawals from their account

By the bank during the specific financial and notes that the two positions Ikunan opposite in the sense that the balance of a bank account in the books of the entity be a debtor while the account balance is established in the books of the Bank and the facility creditor.



At the end of the financial period and when you make a match between the bank statement and bank account books of Professor may match the two positions often differ for the following reasons:



1 - the benefits of being in favor of the facility.

2 - at the expense of benefits under the facility.

3 - under bank fee.

4 - deposits from customers did not reach the notice from the bank.

5 - checks are rejected, and that is not proven in the books of the facility as a result of non-arrival of notifications from the bank.

6 - The amounts are recorded in the books of the bank account established and registered in the bank statement For example: -



Checks drawn on the bank for the benefit of suppliers and recorded in the books of the facility was provided to the bank yet to be paid until the end of the year.

Checks sent to the bank for the collection was not collected by the bank until the end of the year and these amounts are recorded in the books of the bank account established.



For all these reasons or some of it is necessary to prepare a memo to the settlement bank account, and to settle the bank account in the books of the facility with the bank statement, it must prepare a memorandum of the settlement to ensure the validity of the balance in the bank, at least at the end of the financial period and the preparation of final accounts and balance sheet,



It is noted that the processes relating to the bank and recorded in the books of the entity but it is not recorded in the bank statement, it was not a problem and do not require accounting entry because it is restricted already the operations are not recorded in the books of the facility and recorded in the bank statement is required need for an accounting entry to prove before closing of the accounts and before preparing a memorandum of settlement.

The importance of the distinction between Revenue Expenditure and Capital Expenditures

The importance of the distinction between Revenue Expenditure and Capital Expenditures





The importance of the distinction between Revenue Expenditure and Capital Expenditures

Order to achieve the established result of the activity of the profit or loss during the financial period, the accounts must be the result of all downloadable Revenue Expenditure pertaining to the financial period and must also show capital expenditure budget established at the end of the financial period.

The effect of mixing and non-discrimination between Revenue Expenditure and capital expenditure preparation of financial statements misleading and incorrect, if the accounts of the outcome will not reflect properly the result of the establishment activity of the profit or loss during the financial period and that the budget will not give a true and clear information on the financial position of the the end of that period is evident from the following:



In the case of addressing some of the Revenue Expenditure as capital expenditures are added to the value of the asset instead of loading the accounts of the result would entail the following:

* Inflate the profits of the facility and therefore part of that profit represents the profit picture has not been achieved and if the distribution of dividends to shareholders, the part of those distributions have been established of the capital, while the generally accepted accounting principles require the imperative of maintaining capital intact.

* Inflate the tax base due to undergo sham tax profits to the detriment of the financial status of the facility.



In the case of addressing some of the capital expenditure as expenditure charged to the accounts Aiardip the result rather than to add value to the original budget would entail the following:

* Reduce the profits of the enterprise or the emergence of the largest financial loss for the period from the truth if the result of activity loss.

* Reduce the tax base may occur deliberately in order to evade payment of taxes or in order to create a secret or hidden reserves, both inconsistent with generally accepted accounting principles



.

Consequently, the accountant's mind the importance of the distinction between Revenue Expenditure and Capital Expenditures In fact, there are no boundaries to distinguish between them, but some can put the foundations for guidance in this regard.

The foundations of the distinction between Revenue Expenditure and Capital Expenditures

The foundations of the distinction between Revenue Expenditure and Capital Expenditures





The foundations of the distinction between Revenue Expenditure and Capital Expenditures

So that the accountant to prepare a budget reflect honestly and fairly the financial position of the facility at the end of the financial period, as well as final accounts reflect properly the result of the establishment activity of the profit or loss during the financial period, it must take into account some scientific basis to guide when to differentiate between Revenue Expenditure and Capital Expenditures can be summarized that the scientific foundations recognized as follows:



1 - The purpose of alimony and their relationship to revenue:



Alimony is a sacrifice certain to be borne by the facility in exchange for a benefit or service and can distinguish between maintenance or resource and capital expenditure in accordance with the purpose in spending and the relevance of revenue, if the purpose of maintenance to achieve revenue during the financial period, it is the expense Iiardih But if the purpose of achieving income through more than one financial period, it is the expense Iiardih deferred means that there is a direct relationship between Revenue Expenditure and Revenue Expenditure deferred revenue incurred by the entity and if the purpose of maintenance access to the benefits or services utilized during periods of financial long they are considered the expense of capitalism as in the following cases:

* Buy a new fixed asset.

* Increased production capacity or efficiency of a fixed asset is and therefore there is a direct relationship between capital expenditure and revenue Thakha established.



2 - the use of the service:



If the benefit or service that you get by the establishment of maintenance prompt any relating to the current financial period, it is the expense Iiardih any is the use of their results during the current financial period and therefore the maintenance or resource exhausted during the financial period because of the benefit established them during that period and therefore must be charged to the income and if the benefit or service that you get established m alimony short-term that is established to benefit the most from one financial period, such as advertising campaigns large, it is the expense of Iiardih deferred and the part that benefit from the facility during the current financial period is the expense of Iiardip and the rest is deferred use.

If the benefit or service that you get by the establishment of long-term maintenance of any benefit established for a long period of time, it is the expense of capitalism.



3 - the frequency of maintenance:



Characterized by maintenance or resource iterates in each financial period, such as salaries and rent, and maintenance deferred capital expenditure not have a recipe repetition during the financial period other words, maintenance or resource repeated in most cases much greater than the maintenance or resource deferred capital expenditure, but this does not occur in absolute terms and in all cases, the treaty would have to spend the expense of non-duplicate any incidental, however, can be considered the expense of Iiardip such contributions that may be granted to some established charities.



4 - the value of spending and how it fits with Revenue:



There is no doubt that the value of maintenance and its relationship to revenue that results from it is one of the foundations of the distinction between alimony or resource and capital expenditure, if the value of maintenance commensurate with the revenue resulting therefrom which may be offset or covered by this revenue, it is the expense Iiardip, but if the value was relatively large so that not enough revenue Journal of the interview or coverage, it is a capital expense and therefore must be distributed to financial periods that benefit from its services.



5 - the nature of the activity of Establishment:



May determine the nature of the activity established the accounting treatment of the expense of the other words, the alimony may be Iiardip for a particular facility and capital for another facility, according to the nature of the activity established themselves buying a car is the expense of capital in commercial establishments while the expense Iiardip for the facility that traffic in them.



6 - the financial policy of the facility:



In some cases, may affect the financial policy of the facility to adapt the alimony, then, that some of the big firms might be considered some of the capital expenditures such as small calculators and writer expenditures Iiardip bear directly on the accounts of the result on the grounds that the relative importance of those costs low for the facility and although this contradicts the generally accepted accounting principles only by those that follow the way a continuous basis may be acceptable.

Book Total Deposit

Book Total Deposit



The aim of this book is a tighter control on the amounts recorded account individual secretariats.
Since this book was watching the book vocabulary Deposit, the balance of the total Deposit this book should be equal to the total amount retained by the creditor side show vocabulary items from the accounts of the secretariats.

Book budget expenditures

Book budget expenditures








Expenses are under budget in the book of expenses and allocated to each item of Almsrogat or more pages as needed and then each page is divided into boxes to indicate the branches of the item, if any.
This limit expenditures under its terms from the reality of the orders the adoption of exchange and bills Altsubp in the same day they are pulling out is the payment or transfer or support the authorization of settlement and are collected all amounts recorded in the cells horizontally and vertically and spin totals final for each page from page to page until the end of the month where it appears Of these groups at any time how much they spend on each item of expenditure items are Alterhabl from month to month until the end of the fiscal year.

Book budget revenues

Book budget revenues



Restrict the revenue budget in the book is devoted in this book or newspaper, more as needed for each item of income and divide each page of the book to the boxes to indicate the branches of the item, if any.
As it turns out the top of each page contained the budget estimates of income the modifications that occur in these estimates turned out red ink under the original estimate whether the increase or decrease with the clarification of the license number and date of the amendment.
This income is unresolved in the orders of the adoption of exchange and revenues collected in the book Tkda income referred to under the relevant items, according to the distribution shown on the orders of the adoption of bills of exchange or settlement.
Are grouped all the amounts recorded in the various fields horizontally at the total and at the close of today's gathering boxes total, as well as other sub-fields vertically and should be equal among other sub-fields with Gjamali box under the constraint of the sentence. And spin those totals from one page to another so that the end of the first month of the fiscal year, and then these aggregates appear to us how much they were for the second month, and so on until the end of the fiscal year.

Journal General

revenue budget for the custom field for this or any other field by type of account, and restricts the net amount paid in the check payment order or remittance in accordance with the situation.
After completion of the running of all orders the adoption of drainage per day begins with the running bills of the settlement, which gives the serial numbers monthly from the reality of limitation book daily and is this number is the number of the document that restricts in all books other accounting and compliance books the same way as under orders adoption of the exchange.
At the end of the first month of the fiscal year the sum of each box is extracted casual basis and must equal the total cells with inter party debtor creditor and party boxes that appear as digit of the sentence.
And continue enrollment in the next month the same way and then add the boxes the totals of the first month under the totals of boxes the same month, the second to show the total of two months together and move the operations under the totals of the third month and so this process will continue until the last month in the fiscal year so they can learn sentence of every month Separately to each account, as well as inter transactions of any account of the first fiscal year to the end.

Book bank account

Credited to the debit side of this book amounts that were deposited the bank, and shall be credited to the amounts that have been withdrawn from the bank by checks should be allocated with one or more pages for each bank in the case of multiple banks.

Book account liabilities

Book account liabilities




Both sides of the notebook is credited to the credit side amounts owed ​​to the Government by others such as the income accrued that have not received, and credited to the side of the debtor that has been collected from them. And when you have to use this account the expense of the Covenant Center under collection.

Book the expense of the general settlement of receivables

Book the expense of the general settlement of receivables

Restricted in this book value of the services performed by each ministry or government department to the Ministry or government department other so that this account a creditor in the governmental bodies that have benefited from the service and a civilian in the government agencies that had presented a service is allocated one or more pages for each government agency, also uses this account For the purpose of adjustments Agaydip between ministries.

Account book of payment orders

Account book of payment orders

Limit on the credit side of the value of this book is the adoption of exchange drawn by the pay order to the Ministry of Finance and is the constraint of reality is the adoption rate.
Kiid in the debit payment orders and Rdanha notifications from the Ministry of Finance to convert currency. The balance of this account such payment orders which are not by the Ministry of Finance Report for the transfer and exchange is the limitation of the reality of settlement, then edited the financial management set off against the value at the expense of paying for orders added to the account of the Ministry of Finance.
It is worth mentioning that issued by the Ministry of Maya instructions about what should be taken on the orders of payment at the end of each financial year and ensure these instructions into instructions the closure of accounts and preparation of final accounts.

The current account book

The current account book



Hold the ministries and a notebook to a current account with the Finance Ministry to prove all the operations done with it, such as deposit payments to his account the institution or the withdrawal of payment orders or open letters of credit, as well as adherence to the Ministry of Finance notebook to a current account with the ministries and departments to prove the transactions referred to.

Book account transfers

Book account transfers



This book includes both sides. Debtor and creditor. And shall be credited to the net value is the adoption of exchange drawn by the transfer, and is the constraint of reality is the adoption of exchange, and once to respond to financial management or accounting department transfers disbursed this administration is to demonstrate the process aspect of the debtor of such books, under permission settlement liberates the Department shall deduct Value for remittances at the expense of added to the Fund.
And the closing of the account limit value Akhawalat month which did not happen until the last month to make sure they conform to the balance of this account.
The remittances, which remains without an exchange in the last financial year Fterhal individually to the book account transfers your financial year following, and sacrificed in the book of the year mentioned in front of each the sum of all its data from the fact book the previous year, and should track these amounts in order to ensure that the Fund has For payment of their respective owners in the first new fiscal year, and restrictions which were suitable for settlement and payment of account transfers.

Book Fund Account

Book Fund Account



For this book for the registration of all special operations for each fund the movement of cash, which includes two sides of the debtor and the creditor and the other in this book opens a personal account for each Treasurer as responsible for what his custody of the amounts allocated to each account and the number of pages by the movement of work to each fund.
And shall be debited from the account of the Fund all proceeds received by the Fund as well as the amounts withdrawn to finance the Fund is located in the headquarters of the ministry or interest, and drive on the credit side amounts to be deposited the institution as well as the value of remittances are paid from the Fund is located in the headquarters of the ministry or interest, and are under Receipts mentioned cash and the amounts deposited the institution and the value of remittances disbursed from the Fund under the authorization of the settlement, which Enbgb that liberates Alidarpalmalip or the accounting department as soon as you receive from the Treasurer detection Bmqubaudhath and payments are to prove these processes in the ear of the settlement to the extent that cash receipts in the right side of the authorization of the settlement discount at the expense of the Fund for added on the left side to the type of accounts Kaliiradat competent and secretariats.
The amounts deposited in the Monetary Agency are recorded on the right side of the settlement, then charged to a current account with the Ministry of Finance for added on the left side to the account of the Fund.
For the value of remittances disbursed from the Fund are recorded on the right side from the ear of an opponent of the settlement at the expense of remittances for added on the left side to the account of the Fund. The amounts withdrawn under orders to pay for the financing of the Fund is located in the ministry or interest are debited from the Fund calculates the reality of orders Anmad exchange that freed them orders such payment.

Dfterhsab Monetary Agency

Dfterhsab Monetary Agency



Restricted in the side of the debtor the amounts that are withdrawn under a payment order boiled and the Ministry of Finance and National Economy for the purpose of opening an account check the value of the ministerial in the organization. And limits on the credit side that the disbursement of the account balance under the ad hoc checks drawn on them.

Books and records, graphs and statistical

Books and records, graphs and statistical



There is a kind of books and records maintained by the government and the purpose of the establishment of such books and records, statements of statistical purpose of serving purposes, financial and then Vagayd in these books are not in accordance to the theory of double-entry, but is just a dump of some data and documents in these records in order to conduct inventory, classify and control The financial statements. The following is a statement of these books

Book connections or control credits

Entrusted to an employee-specific ministry or the interest of keeping book restricts its financial commitments for each budget line item when the item was available from amounts under contracts or agreements to take account of non-correlation drainage only in the amounts assessed and should be signed by author Register links on the is the adoption of exchange By allowing the item or not to allow the item and before completing the procedures of exchange

Register inventory orders the adoption of exchange

Register inventory orders the adoption of exchange





The purpose of keeping this record is the follow-up is the adoption of exchange until the liberation of the transfer, pay order in the sense that a book contained, but the adoption of special Bowam exchange only.

Book Project Control...

Book Project Control...





So that financial management in the ministries Manalrkabp on the movement of project financial bookkeeping it should be a special control projects, according to the approved form which shall be all Maitalk each project responsible for the information exchange and under the supervision of the Director of financial management....

Register control for bank guarantees

Once you submit a bank guarantee from the financial management of the ministry or interest to prove its value and all the data contained in the record monitor safeguards and security on the response history proves reply or send it by registered mail to the grantor or the bank that issued the record in question....

Journal Fund

Journal Fund\





Holding this book by the Treasurer and must be matched periodically with the Fund's account book Almmsuk Bmarafpalidarp Finance, which was previously referred to.
The Journal Book Fund is a statistical caught by the Fund.

And restricts the debtor's side include:

- All sums collected under the warrants and receipts go against it.
- amounts received by the Treasurer of the Monetary Fund to finance the Fund for feeding to meet the amounts spent from the Fund under remittances.

The credit side Viqid tags:

- the amounts deposited by the treasurer in an institution under the cash deposit notices given to him by the institution.
- All transfers disbursed by the Fund of their respective owners

The Accounting Equation-Assets

The Accounting Equation-Assets

Assets Items owned by the University, such as, cash, accounts receivables, inventory, equipment, stocks, bonds, etc.

Accounts Receivable Money owed to the University for goods or services that have been provided by the University.

Example: The Student Union caters an event before payment is received. The money owed to the Student Union is an Accounts Receivable.

Inventory Equipment owned by the University or goods available for resale.

Example 1:You purchase a computer for your department. The computer is capitalized (coded with a capital object code) and becomes part of the University's inventory.

Example 2:The Bookstore buys books to sell. The books are inventory purchased for resale.

The Accounting Equation-Assets
Assets Items owned by the University, such as, cash, accounts receivables, inventory, equipment, stocks, bonds, etc.

Accounts Receivable Money owed to the University for goods or services that have been provided by the University.

Example: The Student Union caters an event before payment is received. The money owed to the Student Union is an Accounts Receivable.

Inventory Equipment owned by the University or goods available for resale.

Example 1:You purchase a computer for your department. The computer is capitalized (coded with a capital object code) and becomes part of the University's inventory.

Example 2:The Bookstore buys books to sell. The books are inventory purchased for resale

The Accounting Equation-Liabilities

The Accounting Equation-Liabilities

Liabilities Money or services owed to someone who has provided the University a good or service.

Examples of liabilities at the University are Accounts Payable and Deferred Revenue.
Accounts Payable Money owed to someone who has provided the University with a good or service.

Example: Your department buys a computer from Gateway. Gateway will ship the computer to your department and send an invoice to Accounts Payable (the department in FSO who processes invoices and cuts checks). An invoice is a request for payment, i.e. a liability, an Accounts Payable.

Deferred Revenue Services owed for monies received.

Example: Someone gives you $1,000 to dig a ditch, you agree and take the money. You now owe that person a ditch, i.e., you haven't earned the $1,000. Revenue that hasn't been earned yet is called Deferred Revenue and because you owe someone something, in this case, a ditch, deferred revenue is a liability. When you dig the ditch, you will have earned the revenue and can record the $1,000 as revenue.

The Accounting Equation-Liabilities


Liabilities Money or services owed to someone who has provided the University a good or service.

Examples of liabilities at the University are Accounts Payable and Deferred Revenue.
Accounts Payable Money owed to someone who has provided the University with a good or service.

Example: Your department buys a computer from Gateway. Gateway will ship the computer to your department and send an invoice to Accounts Payable (the department in FSO who processes invoices and cuts checks). An invoice is a request for payment, i.e. a liability, an Accounts Payable.

Deferred Revenue Services owed for monies received.

Example: Someone gives you $1,000 to dig a ditch, you agree and take the money. You now owe that person a ditch, i.e., you haven't earned the $1,000. Revenue that hasn't been earned yet is called Deferred Revenue and because you owe someone something, in this case, a ditch, deferred revenue is a liability. When you dig the ditch, you will have earned the revenue and can record the $1,000 as revenue.

Cash and accrual bases of accounting

Cash and accrual bases of accounting

We have discussed transactions that include direct and immediate cash flows. Cash was received in the period of earning revenue, or cash was paid in the period of incurring expenses. This is called cash accounting.

Cash (or cash-basis) accounting recognizes the effects of accounting events when cash is exchanged regardless of the time events occur. Cash-basis accounting is not in accordance with generally accepted accounting principles (GAAP).

However, more than often another situation takes place. Cash flows do not match with revenue and expense recognition in the books. This situation falls under accrual accounting.

Accrual (or accrual-based) accounting recognizes the effects of accounting events when such events occur regardless of the time cash is exchanged.

Accrual accounting closely relates to the definition of accounting events recognition.

Recognition is the fact of recording an event in financial records (books).

A recognition act may occur before or after cash has been collected or paid.

The term accrual means that recognition is made before cash is paid or collected.

Illustration 1: Cash accounting and accrual accounting

Cash and accrual bases of accounting



We have discussed transactions that include direct and immediate cash flows. Cash was received in the period of earning revenue, or cash was paid in the period of incurring expenses. This is called cash accounting.

Cash (or cash-basis) accounting recognizes the effects of accounting events when cash is exchanged regardless of the time events occur. Cash-basis accounting is not in accordance with generally accepted accounting principles (GAAP).

However, more than often another situation takes place. Cash flows do not match with revenue and expense recognition in the books. This situation falls under accrual accounting.

Accrual (or accrual-based) accounting recognizes the effects of accounting events when such events occur regardless of the time cash is exchanged.

Accrual accounting closely relates to the definition of accounting events recognition.

Recognition is the fact of recording an event in financial records (books).

A recognition act may occur before or after cash has been collected or paid.

The term accrual means that recognition is made before cash is paid or collected.

Illustration 1: Cash accounting and accrual accounting

The Accounting Equation-Assets

The Accounting Equation-Assets


Assets Items owned by the University, such as, cash, accounts receivables, inventory, equipment, stocks, bonds, etc.

Accounts Receivable Money owed to the University for goods or services that have been provided by the University.

Example: The Student Union caters an event before payment is received. The money owed to the Student Union is an Accounts Receivable.

Inventory Equipment owned by the University or goods available for resale.

Example 1:You purchase a computer for your department. The computer is capitalized (coded with a capital object code) and becomes part of the University's inventory.

Example 2:The Bookstore buys books to sell. The books are inventory purchased for resale.

The Accounting Equation-Assets
Assets Items owned by the University, such as, cash, accounts receivables, inventory, equipment, stocks, bonds, etc.

Accounts Receivable Money owed to the University for goods or services that have been provided by the University.

Example: The Student Union caters an event before payment is received. The money owed to the Student Union is an Accounts Receivable.

Inventory Equipment owned by the University or goods available for resale.

Example 1:You purchase a computer for your department. The computer is capitalized (coded with a capital object code) and becomes part of the University's inventory.

Example 2:The Bookstore buys books to sell. The books are inventory purchased for resale.