“Accounting Procedures in Educational Institution in Banlgladesh

bourn Paper On history Procedures in t each(prenominal)ingal debut in Banlgladesh North second University (nonspecific urethritis) Supervised by Shapon Kumar capital of Minnesota Associate Professor Department Of melodic phrase relationship Govt. Bangla College, Dhaka Prep ard by Md. Bellal Hossain Bapari BBA (Honours), 2nd Year. Roll. 9593910 Department. of invoice Govt. Bangla College, Dhaka. Date of submission Govt. Bangla College, Dhaka Letter of Transmittal Date. To Supervisor Shapon Kumar Paul Associate Professor Department Of score Govt. Bangla College, Dhaka Subject Submission of Term Paper Dear Sir,With due respect it is my pleasure to you my term report card on Accounting Procedures in educational Institution in Banlgladesh. I harbor tried my level silk hat to work sincerely to cover all in all aspects regarding the matter. Though I have faced some limitations to prep ar the term study due to scarcity of bank. Data, time, limitations. I have really enjoyed t he hand work behind preparing the term paper. I hope you entrust asses my term paper considering the limitations of study. Your var. advice encourages me to do further work. I shall be highly appreciating you if you kindly accept my term paper.Your kind approval is solicited. Sincerely Yours Md. Bellal Hossain Bapari BBA (Honours), 2nd Year. Roll. 9593910 Department. of Accounting Govt. Bangla College, Dhaka. student Declaration I do hereby declare that the term paper entitled Accounting Procedures in educational Institution in Banlgladesh. submitted in partial tone fulfillment of the requirement for the degree of BBA (Honours) dept Accounting, National University down the stairs Bangla College Dhaka. I in addition declare that this whole term paper has prepared by me. Md. Bellal Hossain BapariBBA (Honours), 2nd Year. Roll. 9593910 Department. of Accounting Govt. Bangla College, Dhaka. Letter of Acceptance The term paper title Accounting Procedures in educational Institution i n Banlgladesh. Submitted as partial requirement of BBA program. This term paper has been prepared by Md. Bellal Hossain Bapari, Dept Accounting BBA program at National University under Govt. Bangla College. This term paper is approved and accepted in quality from. Supervisor .. Shapon Kumar Paul Associate Professor Department Of Accounting Govt.Bangla College, Dhaka Ac experiencement At first I would like to part thanks to almighty Allah who has given me to the fortune to successfully complete the term paper entitled Accounting Procedures in educational Institution in Banlgladesh. was challenging and interesting program. I would like to give thanks to my honorable supervisor Shapon Kumar Paul for his kind and hearty guidance and close supervisor. It was not possible for me to prepare the term paper properly without his help. I am very much grateful to Mr. Md. Abdus Satter Mazumder. Head of Department), Mr. Md. Jamal Hossain Bhyian Sir. Mr. Md. Jahangir Sir. I am alike grateful to my friends and every one who help to me make the term paper. NSUs mental imagery The vision of North South University (NSU) is to become a leading university and remain as a top center of excellence in higher(prenominal) education and research. It aims at attracting brilliant students, teachers, scholars, and from all over the world. Mission The mission of NSU is to produce highly skilled manpower, visionary professional leaders and responsible and teach citizens.This mission is achieved by imparting high quality higher education, and training, and by conducting useful research so that individuals can achieve their intellectual, social, and personal potentials. NSU is affiliated to developing human capital by sharpening creative thinking. In addition to creation and dissemination of knowledge, its mission includes promotion of humanism and peace through higher education. As a social institution, NSU endeavors to induce changes for betterment of the society as a whole through p ublic services, and through promotion of ethical behavior and social justice. StrategiesTo fulfill its mission, NSU applies five basic strategies (1) it offers socially relevant academic programs which meet the changing wishs of the students coming from different spinegrounds and quest different career goals (2) it hires highly qualified and internationally experienced academics to teach the courses / programs it offers (3) NSU, through a rigorous selection appendage, admits only those students who demonstrate the potential to hire and complete the programs of study they select (4) it provides appropriate physical and electronic infrastructural facilities, logistic yields and an environment conducive to teaching and learning and (5) it practices the principles of good governance that ensure best management practices and encourage academic freedom and faculty-governance. AccreditationNSU is fully accredited by the University Grants Commission, the only national accreditation a uthority in Bangladesh. Its Business School has applied for accreditation of South Asian Quality Improvement outline (SAQS), an accrediting agency created by the Hyderabad-based AMDISA (Association of Management Development Institutions in South Asia) with the technical help from EQUIS (European Quality Improvement System, capital of Belgium and AACSBI, USA. The establishment of SAQS was largely funded by European Union. NSU has already got two of the senior Business School Professors trained in how to respond to the SAQS accreditation requirements. The B- School of NSU has almost completed the required Self-Assessment process.It is expected that the necessary Peer Review will be through with(p) by SAQS before the end of June 2010. International erudition The credits obtained at NSU are accepted in most of the reputable universities of USA, Canada, Australia and an an other(a)(prenominal)(prenominal) countries. NSU graduates are accepted in the Graduate programs of Harvard, Corn ell, University of Pennsylvania, and other well-known universities. Eight Economics graduates of NSU are studying for higher degrees at York University, Canada, with scholarship provided by York University. NSU attracts foreign students from India, Pakistan, Sri Lanka, Nepal, China, Japan, Thailand, Myanmar, Malaysia, Sudan, Saudi Arabia, Iran, Kenya and Nigeria.In addition, under the flying field Abroad and Group Exchange program, students from world-class universities of the USA and Canada such(prenominal) as Brown University, University of Illinois, Urbana-Champaign, Penn State University, Smith College, Mt. Holyoke College, Windsor University, York University, and other similar institutions attend summer semester at NSU and transfer credits back to their parent institutions. The goal of the University is to provide excellent modern education for students with a view to equipping them with the skill and knowledge necessary to lead the country in its quest for development. Along with this, the University also aims at producing students of high moral standard in its students.Northsouth University (NSU) has the authority, under its charter, to provide reading to confer Undergraduate and Post Graduate degrees. It has plans to offer MPhil. and PhD programs in all branches of higher studies including engineering, agriculture, language, law and medical sciences. It has also the authority to grant diplomas, certificates and other academic distinctions. It has also the authority to open new Schools of studies and new institutions on its own campus. The University is run by a number of statutory bodies as required under the provisions of the Private University Act, 1992. Table of Contents SUBJECT MATTER EXPERTISE John McPeek, CPA iii Bud Carlson, CPA iii James Skelton ivChristopher Anderson, MBA iv Introduction WHO NEEDS ACCOUNTING POLICIES AND PROCEDURES The Recent Past 1 The Present 2 The future 2 ACCOUNTING BASICS 2 clerking 3 Accounting 3 Reporting 4 Non-finan cial selective information 4 pecuniary data 4 COMPONENTS OF AN ACCOUNTING SYSTEM 5 Revenue Cycle 6 lodge Entry . 6 silver Receipts / Deposits 6 Accounts Receivable 6 Purchase Cycle 6Purchase puts / Purchasing . 6 Cash Disbursements / incorporates. 7 Accounts collectable.. 7 payroll department Cycle 7 world(a) journal Cycle 7 How does posting work? 7 ACCOUNTING TERMS AND CONCEPTS 8 Double-Entry Accounting 8 BASIC ACCOUNTING STRUCTURE 9 Balance sheet 9 Income Statement 10 Basic Accounting Formula 10 abridgment OF ACCOUNTING CYCLES & ACCOUNTING CONCEPTS 12 ACCOUNTING STRUCTURE ACCOUNTING SOFTWARE PROGRAMS 19 ACCOUNTING METHODS 20Accrual Method. 20 Cash Method 20 dowery of Completion Method.. 21 REPORTING STANDARDS. 21 GAAP Generally Accepted Accounting Principles . 21 The Matching Principle .. 22 Conformity . 22 Valuation . 22 stock-take Valuation. 22 actuality .. 23 TYPES OF REPORTS.. 3 External Reports.. 24 Compilation 24 Review. 24 visit 25 SEC Audit .. 25 Internal Reports .. 5 SUMMARY 26 manual of arms Preparation. Tab 2 SECTION 1 induction . 5 SECTION 2 INSTALLATION INSTRUCTIONS. 7 Editing Files .. 8 Word Processing (Text) Files File Properties And Style formats . 8 Printing Files 9 Technical Support. 10 SECTION 3 YOUR ACCOUNTING MANUAL 11 Style and Format . 11 Considerations in writing your manual . 2 Sources of extra Information 13 SECTION 4 EFFECTIVE COMMUNICATION. 15 Communication and Addressing Your Audience.. 15 Sexism in Writing 15 upshot Usage 16 Organizing Your Thoughts.. 6 Outlining Technique 16 Defining the Format and Organization of Your Manual 17 Design Features 18 Style and Mechanics.. 18 Sources of additional Information 19 SECTION 5 ACCOUNTING PROCEDURES 1 Format . 21 Heading Information . 21 Title And Introduction.. 23 The Body Of The Procedure Statement .. 24 Attachments 24 Authorization. 5 Production And Distribution . 26 Revising And Updating Statements .. 26 Accounting Manual Tab 3 1. 0 Purpose.. 5 2. 0 Scope.. 7 2. 1 Responsibility 7 2. Exclusions. 7 2. 2. 1 Internal Auditing .. 7 2. 2. 2 Payroll .. . 7 2. 2. 3 Finance And Treasury 7 2. 2. 4 Information Systems 7 2. 2. 5 Security Planning . 7 2. 2. chance Recovery. 7 3. 0 Management Responsibility 9 3. 1 Accounting Organization.. 9 3. 1. 1 Accounting Department Organization map 9 3. 1. 2 Finance & Treasury Responsibilities 10 3. 1. 3 Controller Responsibilities. 10 3. 1. Accounting Staff Responsibilities.. 11 3. 1. 5 Operations Staff Responsibilities .. 12 3. 2 Management Commitment. 12 3. 3 Management Accounting Policy. 12 3. 4 Planning . 13 3. 4. 1 Accounting Objectives 13 3. 4. Accounting System Planning .. 13 3. 5 Responsibility, Authority, And Communication . 13 3. 5. 1 Responsibility And Authority .. 13 3. 5. 2 Management Representative 13 3. 5. 3 Internal Communication.. 14 3. 5. 4 Referenced Procedures 14G Management Reports Activities 1. 0 Preparation Guidelines 2. 0 Daily Flash Report 3. 0 periodical Financial Report 4. 0 Six-Week Cash Flow Report 5. 0 Budget Vs. Actual Report 6. 0 Financial Statements 7. 0 Department Reports References A. national Accounting Standards Board (FASB) B. Generally Accepted Accounting Principles (GAAP) Forms G Ex1 Department Reporting epitome G Ex2 Daily Flash Report G Ex3 weekly Financial Report G Ex4 Six Week Cash Flow Report G Ex5 Budget vs. Actual Report G Ex6 Financial Statements G Period-End Review & Closing Activities 1. 0 Closings Preparations 2. 0 Balance Sheet Assets 3. Balance Sheet Liabilities And Stockholders Equity 4. 0 Income Statement Revenues 5. 0 Income Statement Expenses 6. 0 Financial Ratio Analysis G&A106 Controlling Legal Costs Activities 1. 0 Arbitration 2. 0 Legal Services 3. 0 Legal Billings G&A107 Taxes And redress Activities 1. 0 Organization Fees And Taxes 2. 0 Business Activity Fees And Taxes 3. 0 Payroll Fees And Taxes 4. 0 Excise Taxes 5. 0 Other Taxes And character references 6. 0 Tax pays 7. 0 Insurance References A. Trust Fund Re covery Penalty Forms G&A107 Ex1 Federal Tax Calendar G&A108 Property Tax Assessments Activities 1. 0 Review Of Assessments 2. 0 Appealing Of Assessments G&A109 Confidential Information Release Activities . 0 Financial Information Requests 2. 0 Personnel Information Requests 3. 0 ascribe Reference Inquires Forms G&A109 Ex1 Non-Disclosure Agreement G&A110 Document Control Activities 1. 0 Document Distribution 2. 0 Document Revision 3. 0 Procedure and Work Instruction Format 4. 0 Temporary Changes Forms G&A110 Ex1 Request For Document Change (RDC) G&A110 Ex2 Document Change Control CSH101 Cash Drawers And Credit Cards Activities 1. 0 Opening 2. 0 Transactions 3. 0 Special Tender Items 4. 0 Closing 5. 0 Chargebacks And Disputed Transactions 6. 0 Security Precautions Forms CSH101 Ex1 Daily Cash Report CSH102 Cash Receipts And Deposits Activities 1. Receiving Cash Drawers 2. 0 Application Of Accounts Receivable 3. 0 Deposit Forms CSH102 Ex1 Deposit Log CSH103 Problem buffalo chips Activ ities 1. 0 unsigned Checks 2. 0 Partial Payment Checks Marked Payment In Full 3. 0 Returned Checks 4. 0 Redeposited Checks References A. Uniform Commercial Code (UCC) B. Bad Check integrity Forms CSH103 Ex1 Bad Check Notice CSH104 Wire transferrals Activities 1. 0 Incoming Wires 2. 0 Outgoing Wires References A. FRB Reg D Reserve Requirements Of Depository Institutions B. FRB Reg E Electronic Fund Transfer Act Forms CSH104 Ex1 situate Wire Instructions CSH104 Ex2 Wire Transfer Form CSH105 Check Signing Authority Activities 1. Authorized Check Signers 2. 0 Changing Check Signers 3. 0 Authority Levels Forms CSH105 Ex1 Check Signing Authority Log CSH106 Check Requests Activities 1. 0 Check Origination 2. 0 Check Stop Payment Forms CSH106 Ex1 Check Request CSH107 Bank Account Reconciliations Activities Bank Statement Preparation Computerized Format Manual Preparation And Reconciling Items Computerized Preparation And Reconciling Items Adjustments And Other Troubleshooting Forms CSH10 7 Ex1 Sample Bank And Book Balances Reconciliation Inventory & Assets . Tab 6 INV101 Inventory Control Activities 1. Inventory Stocking And Storage 2. 0 Inventory Usage 3. 0 Inventory surety 4. 0 Inventory Obsolescence 5. 0 Inventory Disposal References A. Food And Drug Administration (FDA) Food Code Forms INV101 Ex1 Inventory Requisition INV102 Inventory Counts Activities 1. 0 Inventory Types 2. 0 Preparation For Inventory Counting 3. 0 Period End Cut-Off 4. 0 Complete Physical Count Cost (Or Sku) Method gross revenue night club Routing And Review Invoice Preparation And Posting Distribution Accounts Receivable REV106 Invoicing And Accounts Receivable Activities 1. 0 2. 0 3. 0 4. 0 Forms REV106 Ex1 Invoice REV 106 Ex 2 Accounts Receivable Write-Off Authorization REV107 Sales Tax CollectionActivities 1. 0 Basis Of Tax 2. 0 Applicable Sales Tax Rates 3. 0 untaxed Sales 4. 0 Sales Outside Of Our Jurisdiction 5. 0 Sales Tax Billing REV108 Progress Billing Activities 1. 0 Contract T ypes 2. 0 division Of Contract Amount 3. 0 Progress Claims 4. 0 Release Of Holdback REV109 Account Collections Activities 1. 0 Collection Process 2. 0 Seriously Delinquent Or unresponsive Accounts 3. 0 Working With Collection Agencies 4. 0 Writing Off Un calm Debt References A. Fair Debt Collection Practices Act (FDCP) Forms REV109 Ex1 Account Collection Control Form REV110 node Returns Activities 1. 0 Origination 2. 0 Receiving Goods And Processing 3. Returned Goods Disposition Forms REV110 Ex1 30-Day Satisfaction Guarantee REV 110 Ex2 Returned Goods Authorization Purchasing PUR101 trafficker Selection Activities 1. 0 Vendor Selection 2. 0 Vendor reviews 3. 0 Vendor Files Forms PUR101 Ex1 New Vendor Notification PUR101 Ex2 Vendor Survey Form PUR102 General Purchasing Activities 1. 0 monastic order Determination And Requisition 2. 0 couch Placement 3. 0 Recordkeeping And Matching 4. 0 Sundry Purchases Forms PUR102 Ex1 Purchase Requisition PUR102 Ex2 Purchase Order PUR102 Ex3 P urchase Order Log PUR102 Ex4 Purchase Order Follow-Up PUR102 Ex5 Daily Sundry Payable Log PUR103 Project Purchasing Activities 1. 0 Purchasing Overview 2. 0 Requisition For Material Order 3. 0 Orders And Arrivals 4. Follow-Up 5. 0 Receiving Procedures 6. 0 Material Transfers 7. 0 Sundry Purchases Forms PUR103 Ex1 Order And Arrival Log PUR104 Receiving And Inspection Activities 1. 0 Receiving 2. 0 Inspection 3. 0 Rejection, Discrepancies And Disposition 4. 0 Stocking 5. 0 Product Returns Forms PUR104 Ex1 Receiving Log PUR104 Ex2 Receiving and Inspection Report PUR104 Ex3 Inventory Inspection Levels PUR105 Shipping And Freight Claims Activities 1. 0 Shipping 2. 0 Receiving 3. 0 Claims Procedures 4. 0 extra Information Resources References A. Interstate Commerce Act PUR106 Accounts Payable And Cash Disbursements Activities 1. 0 Documenting Accounts Payable 2. record Merchandise Payables 3. 0 Recording Non-Merchandise Payables 4. 0 Payment Of Accounts Payable 4. 0 Manual Checks Embezz lement Prevention Tab 9 SUBJECT MATTER EXPERTISE .. v Dana L. Turner .. v 1. 0 ORGANIZATIONAL STRUCTURE AND FUNCTIONS.. 1 1. 1 Where Embezzlers Look For Opportunities.. 1 1. Corporate Culture 1 1. 3 Code Of Conduct 2 1. 4 Summary .. 2 2. 0 EMPLOYEES RIGHTS . 3 2. 1 Establishing The Companys And Employees Rights . 3 2. 2 Employee Rights To Privacy And Related Issues 3 2. The Employee Polygraph Protection Act. 4 2. 4 word of advice To Suspect Employees. 5 2. 5 Summary . 6 3. 0 EXAMPLES OF EMBEZZLEMENT SCHEMES .. 15 3. 1 Misuse Or Misappropriate Funds.. 15 3. 2 The Most Popular Embezzlement Schemes 15 3. Summary .. 16 4. 0 CRITICAL AREAS OF RISK TO EMBEZZLEMENT.. 17 4. 1 Areas Of Risk .. 17 4. 2 Summary . 22 5. 0 UNIVERSAL SYMPTOMS OF EMBEZZLEMENT ACTIVITY 23 5. 1 Embezzlements Are Predictable.. 23 5. 2 Motives For Committing Embezzlement 23 5. Summary 26 6. 0 PROFILE OF AN EMBEZZLER .. 27 6. 1 Common Characteristics Shared By Most Embezzlers.. 27 6. 2 Summary 28 INV103 meliora te Asset Control Activities 1. 0 Acquisitions 2. 0 Dispositions 3. 0 Asset Records Forms INV103 Ex1 Capital Asset Requisition INV103 Ex2 Asset Disposition Form INV103 Ex3 Bill Of Sale INV104 guest Property Activities 1. Receipt, Inspection And Stocking 2. 0 Unsuitable Or Missing Items 3. 0 customer Supplied Tooling And Fixtures 4. 0 Intellectual Property Forms INV104 Ex1 Material Return Notice INV105 fix Asset Capitalization & Depreciation Activities 1. 0 Capitalization 2. 0 Depreciation References A. IRS Publication 946 How To Depreciate Property Revenue Tab 7 REV101 Sales Order Entry Activities 1. 0 Sales Representatives 2. 0 Internet Orders 3. 0 Credit Department 4. 0 Sales Administration 5. 0 Manufacturing/Shipping 6. 0 Customer Service 7. Accounting/Billing 8. 0 Changes To Orders 9. 0 Additional Information Resources REV102 Point-Of-Sale Orders Activities 1. 0 Point Of Sale 2. 0 Sales Orders And Invoices 3. 0 Sales Invoices And Accounts Receivable REV103 Customer Credit App roval And footing Activities 1. 0 Credit Application 2. 0 Credit Investigations 3. 0 Credit Approval/Rejection 4. 0 Additional Information Resources References A. Equal Credit Opportunity Act (ECOA) B. Truth In Lending Act (TILA) C. Fair Credit Billing Act (FCBA) D. Fair Credit Reporting Act (FCRA) E. FRB Reg B Equal Credit Opportunity Act F. FRB Reg Z Truth In Lending Act Forms REV103 Ex1 Credit ApplicationREV103 Ex2 Request For Credit Approval REV 103 Ex3 Credit Inquiry REV104 Sales Order Acceptance Activities 1. 0 Document Verification 2. 0 Telephone Confirmation 3. 0 Order Acceptance Forms REV104 Ex1 Phone Confirmation Checklist REV105 encumbrance Of Goods Activities 1. 0 Shipping Inspection And Packaging 2. 0 Export Shipping 3. 0 Manifest Systems 4. 0 Shipment Pick-Up 5. 0 Additional Information Resources Forms REV105 Ex1 Shipping Log REV105 Ex2 Commercial Invoice Who Needs Accounting Policies and Procedures? This introduction is an be primer to explain the basic concepts of score, its structure, standards and definitions. The need to review these concepts is greater now then ever.On one hand, popular accounting programs for small and mid-sized businesses have become more(prenominal) widely used than ever before, and on the other hand, industry consolidation has significantly reduced the accounting program choices to just a handful. These choices are typically inexpensive, easy to implement, and come with little have to develop appropriate policies and procedures to ensure that the data generated by these programs is accurate and complete. Entry-level software like Quickbooks and midlevel software like MAS-90 or Great Plains share this common deficiency. The shop musical accompaniment is long on the explanation of user features and short on policy and procedural advice for appropriate use. The Recent Past Only twenty age ago, small to medium sized businesses faced daunting choices for selecting an accounting corpse.There were only three choices Continue to use a full manual system (a blanket(prenominal) pegboard one-write system, employing many journals anchored to an imposing cloth bound general leger book that rivaled the size of the largest Websters Dictionary), buy or lease a computerized accounting system, or pee your own. The manual systems were not trivial. They were produced by major firms, which provided on-site implementation and training. These systems were well accounted with many policies and procedures built into the regimented use of the one-write journals and corresponding ledgers. An alternative finis was to purchase or lease an automated information system.But this required another decision of whether to buy a ready made product or inning your own. To make this decision, the company would typically hire a consultant or CPA firm to perform a comprehensive needs analysis. The consultant would last select, either a commercially built multi-module accounting program (like Solomon, our Real World), or a programmer to develop the structure from custom code (RPG was a popular language used to create custom accounting programs). Either one of these alternatives would have to run on a leased or purchased use mini-computer system, (the IBM 36 was the popular mid-size business choice for many years).Both solutions required tremendous resources in time and money. Even the ready made solutions required plenty of additional programming to fit it into the specific companys needs. For a half a year or more, various consultants, programmers and specialists would write code, test and rewrite code. In either case, corroboration was paramount. Hence policies and procedures, as they applied to the mechanics of the accounting system were well documented as a by-product of the installation and implementation procejss. The total cost in the purchase or lease of the hardware and software (ready made or custom built), and in the companys own human resources, was staggering. The PresentImagine the mo nths of decision making preparation, the months of development, the reams of documentation and the total costs that easily went from tens of thousands, to hundreds of thousands of dollars. Compare this to the present practice occurring throughout the country on a fooling basis. The owner, or the owners controller or other designee walks into a local retailer, picks up a copy of the most successfully marketed accounting software package, (ie the one occupying the most prime and visible shelf space), drives back to the office, and loads the program on any available PC computer. There you have it the decision making process, needs analysis, implementation and installation all for the monetary value of $299 The future The future begins today, with your purchase of this 4expertise Accounting Policies and Procedures Manual.This manual is needed more now than ever. Accounting systems are more accessible than ever before. Unfortunately, they come with no instructions. The user guide that c omes with the accounting software only explains what the menu options do, it doesnt explain which options result in sound accounting practices. Accounting software is looking more and more like your own internet browser home page, (no surprise since each manufacturer is competing to be your primary web portal). In the process, the actual functions of accounting are less obvious, and as a result, less understood. This introduction is a look behind the scenes of the splash screen.Hopefully, by understanding the concepts and consistent accounting rules utilized by all accounting software programs, you will develop more confidence to rely on the information generated by the program and you will be able to use it more effectively to run your company. Accounting Basics Three important terms that are easily confused clerking Accounting Reporting What are they and how do they interrelate? Bookkeeping Bookkeeping and accounting share two basic goals To keep track of income and expenses, thereby meliorate The Companys ability to achieve profitability To collect the necessary financial information about The Companys business to file required reports and tax returns Bookkeeping refers to the actual transactional entry and recording of data. Examples are writing checks, processing payroll, making deposits, recording disbursements and recording passs. AccountingAccounting encompasses the broader responsibilities over developing and maintaining the accounting system under which bookkeeping functions are performed. Accounting is concerned with the timely and accurate recording of transactions, providing useful management information, and properly reporting such information for various user needs. Developing and maintaining an accounting system involves setting up and maintaining an appropriate chart of accounts for the particular business. Policies and procedures are then established to provide guidance for all possible financial transactions, from source documents (checks, gross sales orders, etc. ), to journals (payroll journal, property disbursement journal, invoice register, etc. , to the general ledger, (based on the chart of accounts), and ultimately to a variety of reports for all internal and external needs. Bookkeeping and reporting can be thought of as the input and output of a complete accounting system. Accounting policies and procedures ensure Reporting Reporting, (the output of the data generated through various bookkeeping functions), is used for both internal and external purposes. Internal Reports are reports used within the company, by both management and other designated personnel. Internal reporting can be further divided into financial and non financial data. Non-financial data Non-financial data includes a variety of measurement and productivity data, relevant to the specific business.These can be daily customer count, web page hits, production activity per employee hour, units and total weight of product shipped, or e ven daily weather conditions. Financial data Examples of financial data reports include Financial statements Profit and loss reports (income statement), balance sheets and cash flow statements Daily reports with critical balances, such as, sales, cash level, inventory, accounts receivable and accounts payable Segmented profit and loss reports (or P/L) on specific jobs, profit centers or departments Register reports, listing all transactions for specific areas such as, payroll, checks, receipts, invoices, etc. Listings of source data files such as customer, employee, vendor and inventory lists. Aging reports for both Customers (accounts receivable or A/R) and Vendors (accounts payables or A/P) Inventory reports for costing and valuation Exception reports open purchase orders, back orders, inventory stock outs. External reports generated for the use of people or organizations international of the business. Report data and format will vary depending on user Banks, lending in stitutions. To observe the financial viability of a business and to determine its ability to support additional amounts and types of debt financing Employees. To determine the stability of the business of their employer this may be useful in wage negotiations Suppliers. To assess the suitability of granting credit terms to a business Existing and Potential Investors.To assess the potential risk of investing in a business and to monitor the status of existing investment in a business Public. To gain more insight into any business, which is legally required to make certain financial information available Government. To fulfill the requirements of all applicable local, state and federal reporting statutes, including income, sales, insurance, property, and payroll tax returns Media / Press. To use available business reports in specific trade and business publications Components of an Accounting System The financial transactions of any accounting system can be grouped into four ma jor transaction cycle groups Revenue Cycle, Purchase Cycle, Payroll Cycle, and General Journal Cycle.Transactions in the form of sales invoices, receipts, purchase invoices, checks and payroll entries are stick on to the appropriate journals. Simultaneously, these postings are also recorded in the General Ledger. The General Ledger accumulates all transaction activity, organized by account classification. Various reports, including financial statements can then be prepared from the data collected in the General Ledger. Corrections or necessary adjustments can be made to the General Ledger by creating adjusting journal entries, posted to the general journal. The succeeding(a) outline on the next two pages provides more explanatory detail on these four cycles . Revenue Cycle Order Entry Invoices entered through ask entry, through sales orders or through a point-of-sales system, (such as a cash register) are posted to the sales journal. These entries also accumulate on the accounts receivable ledger, organized by customer. If the business maintains an inventory, the posting of sales also affects the inventory ledger. Finally, all sales journal activity is also posted to the general ledger Cash Receipts / Deposits Receipts on sales and other bank deposits are posted to the cash receipts journal. Sales receipts information also accumulates on the accounts receivable ledger, organized by customer.These postings are also entered on the bank account ledger. Finally, all cash receipts journal activity is also posted to the general ledger. Accounts Receivable Accounts Receivable is a separate journal that records both sales and cash receipt data by customer. The data comes from the postings to the cash receipts journal and the sales invoice journal. 2. Purchase Cycle Purchase Orders / Purchasing Invoices entered through direct entry or through purchase orders are posted to the purchase journal These entries also accumulate on the accounts payable ledger, organized by vendor. If the business maintains an inventory, the posting of purchases also affects the inventory ledger.Finally, all purchase journal activity is also posted to the general ledger Cash isbursements / Checks Payments on account or for expenses are posted to the cash disbursement journal. Payment on account information also accumulates on the accounts payable ledger, organized by vendor. These postings are also entered on the bank account ledger. Finally, all cash disbursement journal activity is also posted to the general ledger. Accounts Payable Accounts Payable is a separate journal that records both sales and cash receipt data by vendor. The data comes from the postings to the cash disbursement journal and the purchase journal. 3. Payroll Cycle Payroll data, by employee, for each payroll data is entered into the payroll journal.These postings are also entered in the cash disbursements journal and the payroll ledger. Finally, all payroll journal activity is also posted to the g eneral ledger. 4. General Journal Cycle Corrections or adjustments to the above major transaction cycles can be made through adjusting journal entries, posted directly to the General Ledger. These are compiled in a separate journal, known as the General Journal. How does posting work? The specific postings, as outlined in the cycles above, do not unavoidably take place as separate steps, especially in computerized environments. There are only two basic regularitys of posting in computerized accounting systems real-time posting and batch posting.In real-time posting, the source transaction, (check, bill, payment, receipt, etc. ), is posted to the specific journal and any related subsidiary ledgers (accounts receivable, accounts payable, inventory, bank account, etc. ), and is simultaneously posted to the general ledger. In batch posting, the journals and subsidiary ledgers are posted, but entries are not yet posted to the general ledger. Posting these journals to the general ledge r is done separately. Typically, a group of transactions is entered, a full days worth, for example. Later, after the journals are reviewed for accuracy, this entire days group, or batch is posted to the general ledger.To understand this posting process better, it would be helpful to follow specific transactions through a sample company. First, however, we need to define various accounting terms and concepts. Accounting Terms and Concepts Double-Entry Accounting We can justifiably thank the 14th century Italian merchants for developing the doubleentry system of accounting that we still use today. It is widely believed that Benedetto Cotrugli was the first to document this concept of double-entry accounting. In 1458, he wrote Delia Mercatura et del Mercante Perfetto (Of Trading and the Perfect Trader), which included a brief chapter describing many of the features of double entry accounting.Years later in 1494, Luca Pacioli, from San Sepulcro in knightly Tuscany, published The Summa s 36 short chapters on bookkeeping, entitled De Computis et Scripturis (Of Reckonings and Writings), so that the subjects of the Duke of Urbino could learn how to conduct business and to provide the trader with a fast method to determine his assets and liabilities. For centuries before, commercial transactions had been recorded and journalized, whether on paper, papyrus or clay tablets. However, these journals provided only totals of transaction groupings. It was the Italians that first recognized that it is impossible for a business transaction to occur without affecting at least TWO accounts. There can never be only one effect from a transaction.An Italian farmer sells wood to a shipbuilder for 400 ducats. To account for this transaction he would record wood sale 400 ducats. His sales account has been change magnitude by 400 ducats. But, what else has happened? What other account was affected? His cash account also increased by 400 ducats. What if he sells his wood to the shipbu ilder on credit, and he receives no cash? In this case its his accounts receivable account, which increased by 400 ducats. There are always, at least two sides to each transaction. Later, when the shipbuilder pays his debt to the farmer, the farmer records an increase in his cash and a decrease in his accounts receivable by 400