i> Define the term accounting

ii> Differentiate accounting from a) Bookkeeping b) Cost accounting c) Management

accounting.
iii> State the need of accounting information and its uses.
iv> Explain ten 10 source documents used as evidence of recording financial transactions
v> Mention books of original entry
vi> Define regulatory frame work
vii> Explain five roles of Regulatory Framework.

1. Accounting is the process of recording and reporting financial transactions include the
origination of transaction, its recognition, processing and summarization in the financial
statement. Also accounting is known as accountancy is the measurement, processing,
and communication of financial and non-financial information about economic entities
such as business and corporation,

In Measurement means the quantification of attributes of an objects or events which can be

compared with other objects or events

Communication means be in relation with, to share, transmission of information

Economic entity is one of the assumptions made in generally accepted accounting principles,
almost any type of organization or unit in the society can be an economic entity, examples
are hospitals, companies, municipalities and federal agencies.

Economic entity assumption states that the activities of the entity are to be kept separate from
the activities of it’s owner and all other economic entity.

2. Book-keeping is the activities or occupation of keeping records of financial affairs of a

bussines.

Cost accounting the recording of all the costs in incurred in a business in a way that can be
used to improve its management OR a form of managerial accounting that aims to capture a
company’s total of production by assessing the variable cost of each step of production as
well as fixed cost such as lease expense.

 Variable cost is a corporate expense that changes proportion to how much the company
produces or sells.
 Fixed costs are those which are constant whatever the amount of goods produced.

Management accounting is the provision of financial data and advice to a company for use
in the organization and development of its business, is useful to the management to be
 provided necessary information for decision making and creation of suitable polices within
the organization. Aiming at minimizing cost and maximizing profit

3. Importance of accounting information

 Plays a vital role in running business because it helps you to track income and
expenditures
 Ensures statutory compliance and provide investors, management and Government with
quantitative financial information which can be used in making business decisions.
 Accounting helps evaluate the performance of the business
 Helps with budgeting and future projection
 Helps in dealing with complex taxes or large amount money.
 Accounting improves an organization’s decision making.
 Help in getting more deductions.

4. Ten 10 source document as evidence for financial transactions

 Quotation

A quotation contains terms and the scrition about the seller’s willingness to sell goods and on
what terms.

Contents of quotation; description of goods,price include discounts and other benefits, delivery

schedule, period of validity.

 Purchase order.

It is a request to a supplier in order to supply goods as ordered by a company, a purchase order

contains complete information it

Contents of purchase order: Name and address of the buyer, quantity and description of goods,

price offered, delivery schedule, place of delivery.

 Sales order book

Sometimes when a buyer find goods in seller’s premises he books an order in the sales order
book maintained by the seller. A sales order book is the document generated by the seller
specified the details about the product or service ordered by the customer, along the product and
services details sales order consist of price, quantity, terms and conditions.
  Goods received note (GRN)

When the purchased goo are received the receiver of goods prepares a note for receipt of the
goods. The GRN is prepared by goods inward department

Content: Information about the supplier, date of the receipt of goods, quantity and description of

goods

 Goods dispatched note (GDN)

When the sold goods leave the seller’s place the sender prepare the note for the dispatch of the
goods and it is prepared by outward department.

Content: Date of dispatch of goods, buyer’s name and address, quantity and description of goods

 Invoice

After supplying the goods the seller sends an invoice to the buyer. An invoice is the final proof
that the goods have been sold that is conveys the ownership of the goods from the seller to the
buyer.

Contents : name of the seller, address of the seller, date of transaction, serial number of the

Invoice, description of the goods, name and address of the buyer, amount involved in

the transaction, Date for payment.

 Statement of account

This statement contains of details of all transactions between two parties that are out standard on
the statement date, the statement can also show the payment received and sales invoices they
were located against.

Generally the business owners sends statement of accounts to their customers to let them know
how much they owe for sales that took place on credit during that period.

 Credit note

Is the document used to adjust or rectify the discrepancies made in a sales invoice and to account
for the goods that are returned, it is raised by the sell when he has overchanged the customer. Its
generally printed in red to highlight the fact that it is a credit and not an invoice negative invoice
is the other name of credit note.
  Debit note

Is a document used by the purchaser to adjust or rectify errors made in a sale invoice, a debit
note informs the party that’s its account has been debited due to a certain reason mentioned in
the debit note.

 Receipt

Is the document issued by the receiver of money to the payer in acknowledgement of the
payment.

Content: date, amount received, signature of the receiver, name of the company, details of
payment eg cheque number, invoice reference.

5. Books of original entry.

 Purchase journal
 Sales journal
 Purchase return
 Sales return
 Cash journal
 General journal

6. Regulatory framework

It’s structure which helps an entity decides how to treat items that need to be included in the
financial statement, introduction of regulatory framework primarily aims at supervising and
coordinating the economic activities and the free marketing economy

Are legal mechanism that exist on national and international levels, the can be mandatory and
coercive (national laws and regulations, contractual obligation)

7. ROLES OF REGULATORY FRAMEWORK:

Main role; to help ensure that the accountants produce comparable, consistent, accurate and
easily understandable financial statements and reports
Other roles

 The separation of ownership and control that exist for many organizations

Ensure that the financial statement/ reports that owners received from management with regard
to the financial condition and performance of the organization are true and fair

 To reduce the elements of subjectivity from accounting

Users of financial statement such as owners and investors need clear and comparable information
to assess the financial condition and performance of different organization, therefore all prepare
of this financial statements should be following the same set of roles of this standards

 The need for a set of uniform universal accounting standards

The universality of standards which are based on accounting helps in comparing and contrasting
the financial condition and performance of organization that operating in different countries.

(IFRS- International financial reporting standards) it is the universal standard

 Statutory and other regulatory requirements

Company law usually lays down the reporting requirements for a company

 Requirements of other countries

Whenever an entity operates in more than one country it has to comply with accounting
requirements of each of this countries, the organization has to produce multiple financial
statements and reports, However with the adoption IFRS an organization can produce one set of
statement that would satisfy statutory requirements of all concerned countries