The Role of Accounting in Nigeria

The Role of Accounting in Nigeria

ACCOUNTING CONCEPT

There are various concept and conventions in accounting, all of which are useful in solving practical accounting problem.

They include:

1. THE BUSINESS ENTITY: – Accounting view every business as an entity which is distinct from that person who owns or managed it. Sometimes, the law makes the same distinction as in the case of a limited liability company which is a separate legal entity from the shareholders or directors.

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1. GOING CONCERN/CONTINUITY CONCEPT: – Accounting view every business organization as capable of continuity even where its owners are no longer living.

1. HISTORICAL COST CONCEPTS: – Accounting theory and practice founded open the cost valuation principle. The amount of money actually exchange in a transaction is the amount used as a basic for the recognition of the goods and services acquired.  It is use to avoid errors, bias r even into material misstatement.

1. THE QUANTIFICATION CONCEPT: – Attempt is made to reduce accounting information to common unit and it is (generally) used in most financial reporting. This day information which is to be including in the body of financial statement must be converted to monetary terms to permits aggregate.

1. THE DUAL ASSET CONCEPT: – This principle is the critical care of modern accounting. It sates that there two aspects of accountings, one represented by the assets of a business and the other by the claims against him.

1. ACCRUAL CONCEPT: – Accounting, the income accruing to the owner of a business is not necessarily the amount of cash actually received in a period of amount. Any event which increase the proprietors capital involves the accrual of income.

For example rent, salary etc. have fallen due for payment but due to one reason or the other, they were not paid.

1. THE REALIZATION CONVENTIONS: – Revenue is considered as earned on the day it is realized and this is when good are transferred to be customer in the exchange for a valuable consideration.

• ACCOUNTING CONVENTION

1. MATERIALITY: This concept cells for the recording transaction of which is with while certainties like stampeded pad, ink, pencil etc. are usually cheap and they lack long before they are used up.
2. CONSISTENCY: – This stated that any method of accounting adopted by any organization should be used. Consistency over years in order to avoid over standing the profit or capital of the firm.  Therefore enough notice is usually given before a change to a new method is effected.

1. CONSERVATION: – Accountants make a choice as to which figure will be taken from. This favours the figures which understate rather than over state the profit.

This imply choosing the figures that will cause that capital of the firm to be shown at a lower amount rather than at a higher amount.

• ACCOUNTING INFORMATION VIA USERS

Accounting information system can be classified broadly

into financial accounting system and management accounting system.

The financial accounting system concerns financial record keeping that will provide information about the profit or loss associated with an organization economic activity during a given period.  On the other hand, management accounting system concern all financial decisions that can be taken by management to ensure effectiveness and result oriented operations.

IMPORTANT OF ACCOUNTING INFORMATION

It is necessary that an organization gets necessary accounting information in order to function effectively in the contempory world.  Accounting information is thereofere important for the following reason.

1. INPUT AND THEIR COST OF ACQUISITION

Information is needed for various input of an organization and their cost of the acquisition.

It is necessary to know the size of land acquired, cost of constructing and administrative blocks, cost of raw materials etc.

In order to enable the owner take such decision like replenishment of stock, stock valuation etc.

1. PLANNING PRODUCTION

Accounting information helps an organization to plan out production such decision about the quantity of raw material that should be used, the quantity of raw material that would be used, the quantity of final required can easily be obtained with the help of accounting information.

COST OFVARIOUS ACTIVITIES RELATING TO PRODUCITON

Accounting information is also necessary to decide the type of labour to be acquired and the amount to be paid to labour as wages and salaries.  It is also necessary to use accounting information to solve the problem of transporting goods in and out of the factory.

1. VALUE OF OUTPUT

Accounting information is also required to determined the value of goods required to determine the value of goods produced.  This will enable the owner decide on method of sale and fixing in selling price etc.

There is need for accounting information in order toascertain the amount of profit or loss made in an organization as well as providing necessary tools for the determine of its true financial positions.

USERS OF ACCOUNTING INFORMATION

There are several user of accounting information in typical business organization

1. THE PROPRIETOR: – The owners of business organization have provide the large proportion of its materials and financial resources and are intended in net only that earning from such resources but on how much drawing their should make in order not to adversely affect the progress of the business.

1. PROSPECTIVE INVESTORS: – Those who which to become shareholders of companies required accounting information to enable them examine the performances of such organization in terms of profit ability , solvency etc.

1. EDUCATIONAL INSTITUIONS/RESEARCH INSTITUTION

They required accounting information for teaching and learning process as well as for research purpose.

1. MANAGEMENT: – Management is responsible for the overall position of an organization. They are entirely responsible for the progress or failure of a business and as such use accounting information to assess the extent of their performance which of courses is determined by the amount of profit made and the financial position of such concern among other enterprises.

1. GOVENRMENT: – Among other things they require accounting information to enable them impose tax on profit. This information will provide it with a guide on the ability of an organization to meet it tax obligations.

1. LABOUR UNIONS AND EMPLOYEES: – Labour unions champions cause of their works and are interested in attracting better condition for service of them. They are interested in making sure that are adequately remunerated.

• THE ROLE OF ACCOUNTING IN NIGERIA

There are many functions or roles which the course

accounting performed in Nigeria such function include: –

1. HELP ECONOMY IN PLANNING: – Accounting help an economy to plan how to mobilize its resource because accountants conducts feasibility studies and reports.

For the feasibility reports, an economy sees how best to utilize its resource.

2. PROVIDING USEFUL INFORMATION FOR THE DECISIONTAKING: – Accounting provide information that is useful in decision making affecting resource allocation at all level in the society.

3. POSSIBILITY OF RECORDING PURCHASES AND SALES COMPUTER PAYROLLS ETC: – Accounting makes

it possible for the people that are working in its field to be able to

record purchases and sales, computer payroll or obtain cost and expense in the business forms. Some work as accountant, other in tasks involving.

4. GIVE IDEA OF HOW TO USE ACCOUNTING INFORMATION IN PERIOD AND BUSINESS LIVES: –

Another interesting role of accounting in Nigeria is that most people that are working in the field of accounting must have idea of how use accounting information in their personal and business lives.

5. FOR DECISION OF EFFICIENT ACCOUNTING SYSTEM, THE PERFORMANCE OF AUDIT: –

accounting includes not only the maintenance of the accounting records but also the decision of efficient accounting records but also the decision of efficient accounting systems of performances of audit and interpreting of accounting information.

6. HELP ECONOMY TO OPERATE AT OPTIMUM LEVEL:

          Accounting help an economy to operate at optimum level.  This is because accountants ensure that resource are obtained economically and use effectively and efficiently in this way, accountant help ensure that all the resources of an economy are mobilized and put into optional uses.

7. HELP POTENTIAL INVESTORS TO CUT THEIR INVESTMENT INTO OPTIMAL USES:-

Though the knowledge of accounting, the accounts help potential investors to put their investment into optional uses.  They do this by providing adequate feasibility reports with which they guide would be investors.  They help to increase the investment inflow into an economy.

8. ENABLE GOVERNMETN TO IMPOSE TAX ON PROFIT:

Government among other thing require accounting information will provide it with a guide on the ability of an organization to meet its tax.

9. USE TO KNOW THE EXTENT OF THEIR PERFORMANCE AND PROFIT MADE: –

The management is responsible for overall position of an organization. They are easily responsible for the progress or failure of a business and as such use accounting information to asses the extent of their performance which of course of determined by the amount of profit made and the financial criteria.

10. HELP OF DETERMINE AT A GLANCE THE TOTAL VALUE OF THE OUTSTANDING DEBTOR AND CREDITOR BALANCES: –

the role of accounting under the control account help us to determine at a glance the total value of the outstanding debtor and creditors balances, the receipts from debtors and payments to creditor, the discount allowed, received, the figure of bad debts etc.

11. HELP IN LOCALIZATION OF ERROR IN THE FINANCIAL STATEMENT: –

Accounting help in the financial statement and it is the control account that normally does that.  It helps to pin down errors to particular points instead of having to sieve large volume of accounting document in search of errors, the control accounts will help identify the particular document containing errors.

12. USE TO LEAR THE PROBLEMS IN INCOMPLETE RECORDS

The incomplete records not in strict compliance with the double entry system such records is referred toas single entry. Single entry is when the records replicate only once.  One aspects of the transactions without making the opposite entry to complete the double entry.

So as I said, it helped to clear all the problems of incomplete records such as:

1. they are not in accordance with the double entry principle
2. we cannot know our capital state in the business

• we cannot ascertain our profit after a trading period. As the result of the about short coming.  It is the task of account help

1. determine capital from the incomplete records
2. ascertain profit for a trading period from incomplete records
3. prepare balance sheet as at the end of the trading period

• convert to double entry system

• BUYING AND SELLING PROCEDURE AND MAJOR ACCOUNTING BUSINESS DOCUMENTS

It is necessary to look into the procedure for buying and

selling in most business organization.  In large business concern there are separate purchasing and selling department.

The purchasing officer is responsible for finding out what goods his organization wants and how the best source of supply or purchasing an be located.

Any goods purchased increase the stock of goods the firm and reduces the cash of the firm, where payment of cash is invoiced, but where such goods are purchased on credit, the liability has been created if there is en increase in creditors.

The sales department is responsible for the sale of goods to the customers.  Every goods sold, increased the cash of the firm where cash payment is involved, while an asset (debtor) is increased when sold an credit.  A clear copy of document which will ensure that proper accounting records are kept in order to determine the total cash receipts and payment.  Outstanding debtors and creditors arising from sales and purchases, and other records of business assets and liabilities, expenses, income etc.

Information from these records will facilitate the preparation of various account which will make it possible to determine the true financial position of the business as well as to determine whether profit or loss has been made since it will be difficult to keep certain major business documents that could be used for the recording business transaction when they occur before entries are made in the various books of account.

They are often referred to as source document, such document include: –

1. Inquiring note
2. Order

• Dispatch and delivery

1. Purchasing and sales invoices

They are major documents commodity used as of today.

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