BRIDGING COURSE IN BUSINESS MANAGEMENT WORKBASED ASSIGNMENT NAME: JACKLINE H.A. ODUK COURSE: 1. (a).

BCM003 BOOK KEEPING AND ACCOUNTS

EXPLAIN WHAT IS MEANT BY ACCOUNTING CONCEPTS AND CONVENTIONS AND ARGUE THEIR IMPORTANCE IN THE ACCOUNTING FUNCTION

This are the basic theoretical ideas devised to support the activity of accounting. As accounting developed largely from a practical base, it has been argued that it lacks a theoretical framework. Accounts have therefore tried to develop such a framework, although various concepts have been suggested to have universal agreement. Importance of account concepts and conventions -: In drawing up accounting statements, whether they are external financial accounts or internally focused Management Accounts a clear objective has to be that the accounts fairly reflect the true substance of the business and the results of its operation. The theory of accounting has therefore developed the concept of a TRUE AND FAIR VIEW. The true and fair view is applied and assessing whether accounts do indeed portray accurately and consistently.

1. (b).

EXPLAIN EACH OF THE FOLLOWING ACCOUNTING CONCEPT GIVING EXAMPLES:(i). THE PRODUCE CONCEPT:The Produce concept calls for accounts to be prepared on a conservative basis, not taking credit for profits or income before they are realized but making provision for losses when they are foreseen. For example a cautious view is taken for future problems and costs of the business (they are provided for in the accounts as soon as there is a reasonable chance that such costs will be incurred in the feature.

(ii).

THE ACCRUALS CONCEPT:The accruals concept involves recording income and expenses as they accrue, as distinct from when they are received or paid. It provide that incomes should be recognized when earned and expenses should be recognized when incurred rather than when cash in received or paid for them.

(iii).

CONSISTENCY:Consistency concept demands that accounts be prepared on basis that clearly allows comparability from one period to another. Example:- implies consistent treatment of similar items and application of accounting policies.

(iv).

THE MONEY MEASUREMENT CONCEPT Accountants do not account for them unless they can be quantified in monetary terms. Example:-

o o o o

only financial transactions are recorded Non financial data are ignored Qualities information are ignored Money measured at the time of transaction, no allowance for changing price level.

(v).

THE REALIZATION CONCEPT:With this convention accounts recognize transactions (and an profits arising from them) at the point of sale or transfer of legal ownership rather than just when cash actually changes hands. Example:A company that makes a sale to a customer can recognize that sale when the transaction is legal at the point of contract. The actual payment due from the customer may not arise until several weeks (or months) later if the customer has been granted some credit terms.

(vi)

MATERIALITY An important convention, as we can see from the application of accounting standards and accounting polices, the preparation of accounts involves a high degree of judgment.

(vii)

SUBSISTANCE OVER FORM CONCEPT:This concept provides that when preparing financial statements, the financial reality of transaction should override the legal aspect. Example:Affixed asset acquired on hire purchase is shown in the balance sheet within the period the fact that the asset will legally belong to the hirer on payment of the last installment.

(viii) DISCLOSURE:This concept requires that financial statements provide sufficient information to help uses of the information make knowledgeable and informed decisions about the business.

2. (a).

STATE AND BRIEFLY EXPLAIN THE ENIRE SOUCE DOCUMENTS USED IN ACCOUNTING AND BOOK KEEPING This are the source documents used in accounting and book keeping 1) Cash receipt, 2. Invoice debit note, 3.credit note, 4. payment vouchers, 5. statement of accounts.

(1) CASH RECEIPTS:This either hand written or computer print out issued by any business transaction cash time is received for a good or services. (2) INVOICE An invoice is a commercial document issued by the seller to a buyer, indicating the product and prices agreed for goods and/or services the seller has provided. It is a document that can be used to claim payments for goods or services already rendered to a firm or an organization.
3

(3) DEBIT NOTE A debit note is a document that provides a debt or with information regarding on our standing debt its issued by a tender and services as reminder for a debtor to be invoiced shortly. (4) CREDIT NOTE:This is a document in either form sent by a lawyer to a seller starting a specific amount which has been transferred to credited to buyers account also used in various situation to collect mistake like over changed goods services in invoices. (5) PAYMENT VOUCHERS:This is a break-down of records showing all the activities undertaken over a period of time for a given account.

2. (b).

THE FACT THAT A TRIAL IS IN AGREEMENT IS NOT PROOF OF ABSOLUTE ACCURACY OF THE BOOKS OF ACCOUNTS, DISCUSS.

The fact that a trial balance has agreed on the total debits equal the total credit is not a surety that errors have not been committed when recording and posting of the business transactions.