Effectiveness of Double Entry Accounting System

Romney, M., & Steinbart, P. (2012). Accounting information systems. (12th ed., p. 143). Upper Saddle River, NJ: Prentice Hall.

Firstly the role of accounting is to record business transactions in a systematic way, for instance recording the amount of sales made to customers by John Lewis. This is done by the business to keep the records accurate and updated as well. If bookkeeping is done incorrectly, this will result in the business processing wrong payments or billings. For instance, if John Lewis does not do bookkeeping, the business will end up making payment to wrong suppliers.

All businesses and organisations have to check to see that the information they have stored is accurate. For example, the money coming in and going out have to be correctly recorded otherwise it will look as if the company has not made much profit and it can affect the share prices of the company, affect the employees as the company might not be able to pay the employees and will have to cut down on staff, lenders will not agree to lend money, etc.

The chances of failures can be decreased by executing the checks on the systems. These keep an eye on the systems preventing risks from occurring, and these checks are avoided as the interior controls. The motivation behind the inner controls is to keep the organization safe from risks associated with the modernized accounting-system risks. Organizations change their manual accounting systems to computerized accounting systems for different reasons, this incorporates the points of interest, and the explanation behind utilizing electronic accounting information is instinct. The organizations embrace the policies of their

“Accounting is the information system that measures business activity, processes the data into reports, and communicates the results to decision makers.” (Horngren & Harrison, 2007, p. 4) Decision makers within an organization need accurate accounting information to manage organizational activities and turn these efforts into success. Internal accounting accuracy plays just as important of a role outside of internal

* Accounting information systems depend on codes to record, classify, store, and retrieve financial data. Although it is possible in a manual system to use simple alphabetic descriptions when preparing journal entries, computerized systems use numeric codes (codes that use numbers only) or alphanumeric codes (codes that use numbers and letters) to record accounting transactions systematically. For example, a manual journal entry might include a debit to the “Direct Materials Inventory” account. In a computerized system, the debit might be to account “12345.”

Double entry accounting is based on the fact that every financial transaction has equal and opposite effects in at least two different accounts. In the double entry system, transactions are recorded in terms of debits and credits. Since a debit in one account will be offset by a credit in another account, the sum of all debits must therefore be exactly equal to the sum of all credits. The double-entry system of bookkeeping or accounting makes it easier to accurately prepare financial statements directly from the books of account and detect errors.

The purpose of this report is to present an analysis of Jungle Books’ accounting information system, and finding its inefficiencies, internal control weakness in its expenditure cycle .Also, understanding the importance of these problems, and attempt to solving them without merely adding employees or staffs.

Consistency. When the company chooses the accounting method, it should continue using it throughout. It should be the same from period to period and year to year. If the company chooses to change the method, it should be disclosed and explained why the company made such a change. This concept can also be described as logical coherence among parts or things, when the same sequence is followed from one period to another.

While the accounting method is popular and widely accepted it does have some limitations. There are three

Information systems changed forever the way accounting tasks are processed. The days of green paper pads are gone, and instead businesses have a centralized place where all accounting transactions are entered and saved. No more looking for paper

The two fundamental qualities that make accounting information useful for decision making are relevant and faithful representation. In my opinion, I think both are important quality of accounting information. In order to be relevant you need to have predictive value, and confirmatory value, or both for making decisions. For example, investors form their own expectations about the future based on the predictable value. They were able to evaluate. To be more clear, events such as in the past, present, or future like daily cash transitions are making a difference in the decision. While confirmatory value helps them confirms or

Accounting is the language of business. It is a profession that is being guided by principles, concepts, conventions, laws, etc. All these fundamental building blocks serve as common and general compasses to all practitioners of the profession. In some cases, they are nation-wide tailored, while in other cases, they are universally tailored. Accounting as a living, practical, dynamic and realistic profession covers so many areas of social, economic (business), and governmental activities. Surely, any endeavour that involves monetary and material activities create a room for the services of Accounting. Many of the human endeavours for which the accounting profession plays significant (some times inevitable) roles include; Banking, Insurance, Manufacturing, Farming Contracting, Oil and Gas, Mining, Transportation (Air, Land and Sea), Educational Institutions, Churches, Ministries, ICT, Hire Purchase, Local Government Authorities, Estate Businesses, Export and Import Businesses, Bill of Exchange Transactions, Royalties Transactions, Consignment Transactions, Stock Market Transactions, Sports, Entertainment, Hospitals and Hospitality Industry, etc.

The external users that will want financial information about the company will receive false information because the books are incorrect and this one egregious error will be the tip of the iceberg. Once the external users lose confidence in the company then the company will be doomed to fail because of that lack of trust coming from the accounting department, the very ones that control the money.

An important function of the accounting field is to provide external users of financial statements with assurance that the financial information being presented is both reliable and accurate. This basic function of accounting is so important that there is an entire field of experts, called auditors, dedicated to assuring its proper performance. Throughout history there have been many instances in which the basic equilibrium between an institution and current/potential investor has been threatened due to a lack of accountability and trust between the two parties. This issue has been the catalyst for many discussions regarding the proper procedures a firm should follow in order to provide