 Blurs the boundaries of reporting regimes.

 Small trading owners use this kind of accounting method

because
Owner is the manager, accountant and decision maker
The business is proprietary business in nature.
The owner is the only stakeholder and takes the whole profit.
One time tax system, owner pays income tax.
The accounting system where executor deals with the
accounting by his own wish or way. Every different
business organization who follows informal accounting
has its own system to maintain the accounting or
preparation of the books.
 Mesopotamian Civilization
i)Record keeping of the ancient Egyptians
and Babylonians.
ii)More primitive accounting methods.
 Mauryan Empire
i) Chanakya’s “Arthashathra”
 Barter and Trade system (pre 2000 B.C.)
 Ledgers were like narratives with dates and description.
Example:
Monday, May 12: in exchange for three chickens which I
provided today, William Smallwood promised a satchel of seed
when the harvest is completed in the fall.
 Used as proof if problem arises
 Introduction of currency
 Single-entry Bookkeeping
i) Time Consuming
ii) Inefficient
 Shop name: New Louhajong Departmental store
 Owner’s name: Jahangir Alam
 Accounting System:
 Keeps purchasing accounting accounts on daily basis but selling
accounts on weekly basis. This differs for some unique products.
 All purchase made by cash but sale might be cash or on account both.
 Single ledger and different pages are used for different on account
customers.
 Profit & loss and Ending Inventory are checked once in every single
month.
 Bad debt and shop assistant’s unethical behavior are created for this
type of system.
  Name: Nargis Akter
• Accounting system:
Does not keep any record in written form.
Memorizes every transaction especially to whom she will
get money.
Basically all cash based transactions.
 Owner's Name: Golam Dastoki
 Accounting System:
All transactions are made in cash, so there is no chance to
default.
Transactions are recorded on a daily basis.
Accounts are maintained by a cashier and supervised by the
owner himself.
If any month is missing, the missing amount is solved within a
day.
 Name: Abdul Kuddus
 Accounting Method:
Keeping records on daily basis.
Memorizing all his earnings and expenditure.
No written document is kept.
Knows nothing about formal accounting method.
 Name: Md. Swapan (Owner of a tea stall)
 Accounting Procedure:
 Does not follow any formal accounting procedure.
 Keeping his accounting record on a tally book.
 Estimated business capital is 10,000 BDT.
 Keeping his debtor and creditor lists in his tally book.
 Drawing profit after listing his all selling and purchasing
account.
 Lack of expertise
 No academic knowledge about formal accounting
 Small size business
 Few or no written documents
 No external demand
• Standardization of Informal Accounting is not Feasible

Why ?
• According to Refinitiv (Formerly known as Thomson Reuters) total
listed companies in the world is 108790
• Accounting harmonization revolves around those listed companies
• But hundred percent harmonization of Accounting Practices is not
possible
 Nobes (2006) “The study of international differences in
accounting (and the reasons and motive for them) will remain
an important area of research despite the ongoing
standardization efforts of the IASB”
 No way to bring Accounting practices of billions of people
under standardization.
Accounting is everywhere
After studying the case studies , we know about the fact -

‘Why don’t they follow proper accounting’

Because-
 Lack of literacy in formal accounting method
 Unware about the importance of keeping records
 No available Standardized format
 No External demand