Define the accounting system
The accounting system is a system specialized in organizing and arranging financial information so that it provides databases that allow storing numerical information and performing many operations on it such as classification, evaluation, display, and recording of statements to give an impression of the progress of the financial year at the end of it.
The accounting system can be defined as the framework that includes the rules, principles, and foundations that help the institution to prepare documents and prove them in the books and records, extract data and accounting and statistical statements and achieve internal control through a set of means and tools used in the accounting system.
Here is some information about the accounting system:
- Entities committed to the accounting system: Any institution subject to the provisions of the commercial law or persons producing commercial goods or services in all their forms are subject to the accounting system.
- Foundations of the Accounting System: The accounting system includes many foundations upon which it is based for the continuity of the institution and to ensure its success.
Among these foundations are the following:
The existence of an accounting cycle carried out by the institution, and its duration is often one year, to establish the basic principles of work, which is necessary for it to be an independent cycle and to have an entity-specific to the institution.
The existence of the economic unit and the independence of the institution from its owner.
The existence of the monetary unit determines the type of currency in which the institution deals, which often belongs to the country.
Put only important information in the financial statements, and follow the principle of caution and caution not to overestimate the results.
- Characteristics of the accounting system: The accounting system has many characteristics that contribute to its success, including:
understandability for users.
appropriateness.
reliability.
timing accuracy.
Alignment of cost and return.
Balance the qualitative characteristics.
Conceptual framework of the accounting system
The conceptual framework of the accounting system consists of the following:
assets
They are the resources that the system exploits to provide future economic benefits, through which it is facilitated and the ability to achieve the financial goals of the system, and the assets are included in the budget, and they are of two types; Current and non-current, and the following is a detail for each:
- Current assets: They are those that can be converted into cash within one year.
- Non-current assets: They are fixed and permanent assets to serve the system, such as fixed or intangible funds.
opponents
Liabilities include current obligations on the system that occurred as a result of a decrease in past economic resources. Liabilities are met from the expected revenues of the system. Liabilities are divided into two types; Current and non-current, and current liabilities express the obligations arising from the system that must be paid within a period not exceeding twelve months, and other than that, the liabilities are considered non-current.
outputs (revenue)
The financial year’s outputs or revenues are represented by realizing financial benefits as a result of the activity of the financial system in the company or institution, and the outputs can be either an increase in assets or a decrease in liabilities, and this is an expression of the economic benefits achieved by the company or institution during its annual cycle.
burdens
Burdens express a reversal of outcomes, and they represent the defect in the company or institution and a decrease in economic benefits expressed either by an increase in liabilities or a decrease in assets. Burdens include provisions for depreciation; It is the cost of production or the reserves and losses that occurred in the financial values of the company.
net result
The net result is calculated at the end of the fiscal year to express the state of the institution and determine its economic condition resulting in profit or loss. The net result is calculated by finding the difference between the outputs and the burdens. The result is a profit in the event of an excess of the outcomes compared to the burdens, and the loss occurs when the burdens increase compared to the outcomes.
Pillars of the accounting system
The following are the main pillars or elements of the accounting system:
- Definitions and scope of application.
- Conceptual framework.
- Accounting organization.
- Financial statements.
- Combined accounts and combined accounts.
The importance and objectives of the accounting system
The following is information about the importance and objectives of the accounting system:
The importance of the accounting system
The importance of the system lies in providing many services and facilitating certain tasks, namely:
- Clarify accounting principles and rules and prepare financial statements.
- Responding to users' needs for financial statements.
- Improving the workflow of the organization and providing information in an easy way helps decision-making.
- Facilitate the audit process.
- Ensuring the application of internationally applicable accounting standards, which supports the transparency of accounts.
- Improving the facilitation of loans disbursed by banks.
- Allow small and medium enterprises to apply simplified financial accounting.
Objectives of the accounting system
The accounting system aims to:
- Provide an honest picture of the system through transparency in the presentation of financial information.
- Allowing the organization to compare itself temporally and spatially in financial terms at the local and international level.
- Providing reliable information to investors, allowing them to monitor and track their money.
- Allow foreign companies to merge their accounts and financial statements.
- Reducing burdens through the use of informational means in recording accounting data.
What is the accounting environment?
Definition of Accounting
Accounting is defined as a process consisting of a set of successive activities related to the identification, measurement, recording, and communication of economic and financial data and information expressed in the monetary unit and related to economic units. It also aims to determine the results of the business activity from profit or loss, in addition to preparing a list of the budget with which the institution is financed.
Factors affecting accounting
The following are the most important factors affecting accounting:
- Environment:It is a set of external forces that affect the work of the institution, and it is characterized by movement and continuous change.It includes many elements:
Economic environment.
The political and legal environment.
Scientific and technological environment.
Social environment.
- Users of the financial statements: the financial statements are known as the main source of financial information for external parties that are interested in the business of the institution, so that the financial statements show the financial position of the institution at the time of its preparation, and they are a type of accounting reports. As for financial reports, they are the basic material for financial analysis and an important source to resort to. It has the financial analyst and decision makers in the general framework that includes financial information that cannot be disclosed in the statements, and contains reports of the board of directors and the auditor, and the details and explanations of the financial statements.