Classwork Series and Exercises {Financial Accounting – SS1}: Introduction to Book keeping and Account

Meaning of book-keeping

It can be defined as the the system of recording transaction in business on a daily basis in appropriate book,it is an integral part of account.

Meaning of Accounting

It can be defined as the process of recording,selecting,classifying,interpreting and communicating financial data of an organization to enable users to make decision.Accounting involve measurement and reporting of oraganization profit and loss.

Difference between book keeping and accounting

While bookkeeping involve only the recording of transaction on daily basis in the appropriate book,accounting is concern with the analysis and interpretation.

In other word accounting involve the application of professional competency and skills in presenting accounting information to assist the management decision making.

Importance of Accounting and book-keeping

1. The record shows income and expenditure
2. The record provides a means by which the finance of business are controlled
3. It helps to prevent fraudulent practices
4. It helps to determine the profitability of business concern
5. They are used for tax assessment
6. It provide permanent record for all transaction
7. It can be use for decision making
8. The record also shown the asset and liability of the business.

Users of Accounting information

Principal uses of accounting information are;

1. Managers’
2. Employee
3. The public
4. Investors
5. Government
6. Directors
7. Analyst

Limitation to Accounting Information

1. There is no information as to usefulness, size or quantity because accounting is expressed in monetary terms
2. Accounting information is historical in nature i.e. recording is after the event

Benefits of book keeping and Accounting

The following are the benefit of book keeping and Accounting

• It shows purchases and sales made within a given period
• It provides a written record which is essential for the proper conduct of business
• Good book keeping practices enables one to ascertain the profit or loss made during a trading period
• The existence of reliable financial records helps in management decision -making
• It facilitates reference making to past transaction

Test and Exercise

1. Define Accounting
2. Define book-keeping
3. Give the benefits of book keeping and accounting
4. State the differences between book keeping and accounting

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