Financial Systems & Auditing Essay Example | Topics and Well Written Essays - 3000 words

Financial Systems & Auditing - Essay Example Ledger stores information needed for preparation of financial statements and final accounts. Books of original entry, also known as prime entry books where transactions are initially recorded, such books include sales journal, sales returns journals, purchases journal, purchase returns journal, cash book and general journal. Accounting or bookkeeping assumes vital and helpful role by creating the information for giving responses to numerous questions confronted by the users of accounting information. It gives information how great or terrible the budgetary state of the business is which products or activities have been productive (Singhvi & Bodhanwala, 2006:262). Bookkeeping is vital for a business entity because of the following reasons: - iii) As the business continues to grow, there is an expanded volume of business results in a huge number of transactions, and no business person is able to remember everything. With the help of accounting records, there is no need to remember various transactions (Demski, 2007:33). Apart from the cash flow statement the other accounts are always set on an accruals basis. This basis of accounting requires that the non-cash transactions be reflected in the financial statements for the period in which their effects are encountered and not in the one in which cash or money is actually received or paid. The accounts are often prepared on a going concern basis. This implies that the accounts are made on the assumption that the  organization  will continue to operate indefinitely or for the foreseeable future. The business has no intention to curtail their operation significantly. This concept helps a business to get long-term sources of finance or loans. It also shows the financial stability to the shareholders that will affect the prices of stock (Kolitz et al 2009:507). Because of many different ways of applying concepts, each entity must select the approach that gives the most reliable picture of the entity