THE EFFECT OF ACCOUNTING RECORDS IN AN ESTABLISHMENT (A CASE STUDY OF MINISTRY OF FINANCE IN IDONGESIT NKANGA SECRETARIAT, UYO)
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THE EFFECT OF ACCOUNTING
RECORDS IN AN ESTABLISHMENT (A CASE STUDY OF MINISTRY OF FINANCE IN IDONGESIT
NKANGA SECRETARIAT, UYO)
CHAPTER ONE
1.1 BACKGROUND OF THE
STUDY
Accounting is often vaguely defined as the language of
business even then, this vague definition is not without its benefits. A
language is a medium of communication; communication deals with the
identification, processing, transmitting and receiving information. To say that
accounting is the language of business information is identified, processed,
transmitting and received by the parties in business.
Every language has rules of usage, technicalities which may
not be ignored for effective communication, the same is true of accounting more
importantly, every language has an history which its stages of development and
growth for language, like culture, dead, but living, and growth is a
characteristic of living things likewise accounting in the form it is known
today, did not just appear suddenly, its evolution followed a process at the
nearly stage unconscious but later every carefully guided.
Since accounting serves the interest of business, to be
effective, it must keep space with the various stages of business of
development. It cannot afford to lie behind, otherwise it will lose its
relevance as an effective communication medium.
The purpose of this paper is to trace in a summary fashion,
the various stages of the evolution and development of accounting theory and
practices from the earliest times unto the present. The chapter will process
from the Middle East to Europe and it eventual dispersal. The chapter will also
find some space to devote to the development of accounting in Nigeria.
1.2 EVOLUTION OF
ACCOUNTING
The definition of accounting as the language of business
communication is further useful in the guest for its evolution. For it implies
that accounting must be, at least as old as business exchange indeed,
business exchange would be impossible
without a medium of communication. Even before was invented, there must have
been, in the days of trade-barter, a method of determining by the parties
involved, that the items to be exchange were of comparable value. It is not
difficult to imagine that any unsatisfied party would trigger a haggling and
bargaining process in a bid to extract a fairer deal. The notion of fairness and
comparability involved accounting.
The development of money was as a result of the desire to
have a more objective method of determining past values for comparison
purposes. Therefore, money was invented to serve an accounting purpose, as a
measure of value on his ware, in a process that must be accounting. From the
discussion so far, it can be observed that when commerce advance beyond the
level of trade by adequate for its needs. Therefore money was invented, this
somewhat gives the lie to the definition of accounting only in monetary terms.
Another stage in the evolutionary process must been when
commerce developed to the level of processing in which material, labour and
overheads are employed to produce a trade-able item. This relatively complex advance
implied a greater level of sophistication for accounting, which needs to have
some method of costing the inputs and outputs as well as pricing.
The point being made is that accounting predates writing. All
those early stages, and as was adequate at some times metal records
sufficiently served the purpose of accounting pre-date. At some state, however,
after the invention of writing and in response to the demands of business that
was becoming increasingly complex, written records became necessary.
It is interesting that some of the earliest records known
today are accounting records. They are of the ancient middle-eastern
civilization of Egypt, Mesopotania, Crete and Mycenae. They were mainly records
of physical quantities of goods, suggesting that accounting pre-dates monetary
economy. The system was flexible enough and soon explained to accommodate money
measure of money was not coinage and paper therefore some difficulties were
experienced in maintaining the records.
About 700B.C coinage was invented, probably in Lydia. It
spread with time to other Mediterranean cultures, making it possible for
accounting records to reflect money values. This is why some researchers have
maintained that accounting is a true sense, originated in classical Greece. This
reasoning arose because of the modern definition of accounting in terms of
money measurement it is submitted that is fallacious because, money measurement
is an artificial characteristic of accounting which pre-dates money values.
In those early days, records were inscribed on stones and
marbles. An examples is the partheon building accounts in Athens, which were
inscribed tablets on the Acropolis. Portions of this still exist, with the
later invention of the Papyrus and Scrolls, accounting records became earlier
and more widespread, particularly in Greeks and Roman Egypt.
In 1915, the Zenon Papyri were discovered. They contain
information on business, agricultural and construction projects of third
century estate of Appolnius for a period of thirty (30) years, during the third
century B.C. they gave evidence of a “surprising” elaborate system, which had
been in Greece since the fifth century B.C. The accounting systems employed by
Zenon and “Provisions for responsibility accounting, written records of all
transaction, personal account for wages paid to employees, inventory record,
and a record of asset acquisitions and disposal”. Also in evidence was the
auditing of all the accounts.
The charge and discharge book-keeping survived up to the 17th
Century and beyond, many years the introduction of the principles of double
entry. Despite its shortcomings of the business status, its long survived must
have been because it served the needs of the time well. Business activities
then consisted of a series of independent voyages and expenditures – not going
concerns. Each completed expenditure marked the end of the venture, it was then
an easy task to determine the profit of the voyage. Balance sheets were not
needed.
Moreover, most business firms then were of the sole-trader
type, and with no need to calculate profit on uncompleted expenditures. The
primary accounting need then was that of maintaining a check on the honesty and
accuracy of the clerk – which purpose the charge and discharge method seemed to
fulfilled. Sometimes, the traders did form guilds, which were essentially trade
protection societies or professional associations meant to regulate the
activities of members of the trade. They were also meant to obtain charters
form the crown, which would empower the members of the guild to exercise
monopoly in the trade. Even then, the trade was not carried on the guild but
the members in their individual capacities. This was another factor, which did
not make necessary the calculation profit, and allowed for a long survival of
charge and discharge principles .
In medieval times, there were two forms of partnership,
commenda and societas, neither of which made necessary accounting for profit on
uncompleted venture. The commenda as a kind of limited partnership in which a
financier came together with a merchant to do specific business, e.g.
undertaking a trading expenditures. The financier advanced the funds but took
no part in the management. The profit was showed at the conclusion of the venture. The profit
as showed at the conclusion of the venture. The profit was fairly simple to determine, being the difference between
the cash received from the completed venture, and the cash expended. All that
the manager needed by way of interim accounting service was to maintain internal
control – a purpose well served by the charge and discharge method. Te societas
was more general form of partnership in which the various members took part in
the management, but it was also use eventually for a limited period of time or
specified expendition. Profit was also only calculated on the completed venture
and shared according to the agreed formula.
Charge and discharge book-keeping is, in current terminology,
known a single-entry bookkeeping, and in spite of its survival for a long time,
it eventually proved inadequate even for the maintenance of accuracy and
prevention/detection practices. The stage was therefore set for the evolution
of double entry bookkeeping.
1.3 STATEMENT OF THE
PROBLEM
A poor correlation has been observed in recent years of
accounting records in an establishment among the preparation of final accounts.
There has been some observable monopoly of methods in
accounting records ( holding firm to the only accountant-general handed down
from our fore accountant without considerable change or improvisation) hence
the records remain low. Therefore this study aims at the investigating the
effects that exist in accounting records method adopted by the accountant in an
establishment.
1.4 RESEARCH QUESTIONS
The study is guided by the following research question;
Does the system of accounting record relate to the proper
accountability of an establishment?
Is there any effect on records between qualified and
non-qualified accountant
Is there any difference in record in an establishment with
quality of accounting tool/facilities and those without quality account
tool/facilities?
1.5 RESEARCH
HYPOTHESIS
The following hypothesis were stated and tested to validate
and verify data obtained from the field:
Hypothesis I
Ho: The system of
accounting record relate to the proper accounting of an establishment
Hi: The system of
accounting record does not relate to the proper accounting of an establishment.
Hypothesis II
Ho: There is
effectiveness in records keeping between qualified and unqualified accountant
Hi: There is no
effectiveness in records keeping between qualified and unqualified accountant.
Hypothesis III
Ho: There is effective accounting records in an establishment
with quality accounting tools and facilities to work with.
Hi: There is no effective
accounting records in an establishment with quality accounting tools and
facilities to work with
1.6 PURPOSE OF THE
STUDY
The purpose of the study is to examine the effect of
accounting records in an establishment such as Ministry of Finance and to make
recommendation for the improvement of account records in our ministries.
1.7 SIGNIFICANCE OF
THE STUDY
Accountants have major role in preparing the accounts of the
establishment.
Accounting records will develop positive interest towards
accounting and ensure good accountability. This will lead to an increase in
general transaction, which is a mean of improving a general standard of living.
Basic accounting records will take advantage of an
established innovation in harnessing the untapped bountiful financial resources
available in the Ministry of Finance hence turning the ministries into a more
administrative and transaction ground.
This study is of a great significance of the government
policy makers, and accountants in particular since it is believed that this
investigation will through more light on the importance of keeping account.
This study might go a long way to bring innovations in the
accounting techniques and create an atmosphere conducive for the accountants.
This in turn will act as machinery for economic development of the society.
It is believed that the recommendations from the study will
remind the government of her responsibilities towards improving accounting and
audits its citizen, hence towards improving a solid foundation for
technological take off.
1.8 SCOPE OF THE STUDY
The scope of the study only concentrates on the effect of
accounting records in the Ministry of Finance, Uyo, Akwa Ibom State.
1.8 LIMITATION OF THE
STUDY
In carrying out this research, the following limitations were
faced;
Material: inadequate materials also posed greater constraints
to the research work.
Time factor: the period given for the completion of the study
survey could hardly be enough for a wider and in-depth research into problem
situation.
Finance: the need for the researcher to travel to certain
areas to gather the necessary information was constrained by finance and means
of transportation.
Social factors: some of the respondents are very reliant in
supplying the right opinion to the question because according to the
respondent, a research or accounting record in an establishment have become
intolerable rituals with no action taken on such research findings.
1.9 DEFINITION OF
TERMS
Accounting: the system of recording and summarizing business
and financial transactions and analyzing, verifying, and reporting the results
(Merriam-Webster’s Dictionary & Thesaurus)
Record: this simply means to set down in writing
Establishment: a place of business or residence with its
furnishings and staff.
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