17. What does timeliness of accounting information suggest?

Apart from relevance and objectivity accounting information should be timely in the sense that it should be produced ‘reasonably soon’ after the end of the accounting period to which relates. If there is too long a delay, the accounting information produced will lose the relevance it otherwise might have had.

Accounting information should also be timely in the sense that the reporting intervals should be frequent enough to meet the user’s needs. If the reporting interval is too long, information produced may only be available after the point in time when a decision should have been made.

18. Why do users compare accounting information produced by different businesses?

When arriving at judgment or decisions users will often compare accounting information produced by different businesses. It is therefore useful if items or events common to different businesses are measured and presented in the same manner. Similarly, items or events occurring within the same business should be measured and presented in the same manner from one period to another. In other words, accounting information should possess the quality of comparability.

19. What is meant by comparability and understandability? When arriving at judgment or decisions users will often compare accounting information produced by different businesses. It is therefore useful if items or events common to different businesses are measured and presented in the same manner. Similarly, items or events occurring within the same business should be measured and presented in the same manner from one period to another. In other words, accounting information should possess the quality of comparability.And last but not least is understandability. Users will only be able to employ accounting information in a sensible way if they are able to understand it. This means that accounting information should be set out in a clear and logical manner and not be unnecessarily complicated.

20. What is meant by terms credit and debit ? An account is the basic storage unit for data in accounting. In its simplest form an account has three parts: 1) a title that describes the asset, liability, or owner’s equity account, 2) a left side, which is called the debit side, and 3) a right side, which is called the credit side. This form of account , called a ‘T’ account because of its resemblance to the letter ‘T’, is used to analyze transactions. It appears as follows:Thus any entry made on the left side of the account is a debit entry, and any entry made on the right side of the account is a credit , or credit entry. The terms debit (abbreviated Dr, from the Latin debere) and credit (abbreviated Cr, from the Latin credere) are simply the accountant’s words for left and right.

21. What is a ledger? There are different types of accounts. The most commonly used ones as follows: Asset Accounts, Liabilities Accounts and Owner’s Equity Accounts. In a manual accounting system each account is kept on a separate page or card. These pages or cards are placed together in a book or a file. This book or file, which contains all groups of the company’s accounts, is called a ledger. In a computer system, which most companies have today, the accounts are maintained on magnetic tapes or discs. However, as a matter of convenience, the accountant still refers to the group company accounts as the ledger. To be able to find an account in the ledger easily and identify accounts when working with accounting records, accounts are numbered. A list of these accounts is usually called a chart of accounts.

22. What is the double-entry system for accounting? When did it evolve? The double-entry system, the backbone of accounting, evolved during the Renaissance. The first systematic presentation of double-entry book-keeping appeared in 1494, two years after Columbus discovered America. It was described in a mathematics book written by Luca Paciolli, a Fransiscan monk who was a friend of Leonardo da Vinci, the famous German poet and dramatist, referred to double-entry book-keeping as “one of the finest discoveries of the human intellect”. And, indeed, the importance of the double-entry system a difficult to appreciate. Suffice it to say that the double-entry technique made accounting records more comprehensive and orderly. Before the invention of to double-entry book-keeping accounting records has been disorganized.

23. What was the impact of the double-entry system on economic development of a country? In Britain the first book on the double-entry system was written by one Hugh Old-Castle schoolmaster, who taught arithmetic. No copy of this book has survived. Later some more books describing this new method were published. English businessmen began to employ this recording device. The primary advantage of double-entry accounting, to many historians of accounting, was that it abolished confusion in the accounts by creating order out of chaos.

24. What is the significance of the double-entry system for accounting? The double-entry system is based on the principle of duality, which means that all economic events have two aspects – effort and reward, sources and uses – that offset or balance each other. Because of the way it is designed, the system as a whole is always in balance.

25.Double-entry bookkeeping. Zaheer Younis works in the accounting department of a trading company: ‘I began my career as a bookkeeper. Bookkeepers record the company’s daily transactions: sales, purchases, debts, expenses and so on. Each type of transaction is recorded in a separate account – the cash account, the liabilities account, and so on. Double-entry bookkeeping is a system that records two aspects of every transaction. Every transaction is both a debit –a deduction- in one account and corresponding credit –an addition – in another. For example, if a company buys some raw materials – the substances and components used to make products – that it will pay for a month later, it debits its purchases account and credits the supplier’s account. If the company sells an item on credit, it credits the sales account, and debits the customer’s account. As this means the level of the company’s stock-goods ready for sale-is reduced, it debits the stock account. There is a corresponding increase in its debtors – customers who owe money for goods or services purchased –and the debtors or accounts payable account is credited. Each account records debits on the left and credits on the right. If the bookkeeper do their work correctly, the total debits always equal the total credits’.

26.Accounting. Accounting involves recording and summarizing an organization’s transactions or business deals, such as purchases and sales, and reporting them in the form of financial statements. In many countries, the accounting oraccountancy profession has professional organizations which operate their own training and examination systems, and make technical and ethical rules: these relate to accepted ways of doing things. Bookkeeping is the day-to-day recording of transactions. Financial accounting includes bookkeeping and preparing financial statements for shareholders and creditors (people or organizations who have lent money to a company). Management accounting involves the use of accounting data by managers , for making plans and decisions.