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Define accounting

Accounting is the process of identifying, measuring and communicating economic information to permit informed judgement and decisions by users of the information


Differentiate between accounting and bookkeeping

Bookkeeping is the part of accounting concerned with identifying and measuring economic information.

Accounting concerns itself with communicating, and facilitating informed judgements and making decisions.

Technology has enabled accountants to focus on using accounting for a competitive advantage.


List the steps in the accounting cycle

1. Obtain information about transactions from source documents
2. Analyse the transactions
3. Record transactions in a journal
4. Post from journal to general ledger accounts
5. Prepare an unadjusted trial balance
6. Record adjusting entries and post to general ledger
7. Prepare an adjusted trial balance
8. Prepare financial statements
9. Close the temporary accounts to r/e
10. Prepare a post closing trial balance


Internal controls in the accounting cycle

Sequentially numbered documents, physical security, transaction limits, equality of debits and credits, trial balances and audits


What are the coding systems used in the ais

- Sequential numbering e.g. cheques, purchase orders and other source documents
- Block e.g. accounting software standard chart of accounts
- Hierarchical e.g. state university 101-11-08-81
- Mnemonic e.g. inventory items (letters that are easier to remember)


Human judgement in the accounting cycle

- Designing source documents: should be clear and easy to read, omit unnecessary information and give space for required data.
- Recognising recordable transactions: not every document in AIS is a recordable transaction and vice versa.
- Estimating amounts and interpreting accounting rules: many journal entries use estimates such as depreciation


Information technology in the accounting cycle

Information technology can be used for many tasks, such as recording transactions, posting them to the ledger, preparing a trial balance and financial statements, closing the accounts.