Boundary rules exists of rules such as entity, periodicity, going concern and quantitative.
The entity is the single way between owner’s private activities (such as property, investment, loans made) and owner’s business affair (current liabilities, current assets, fixed assets). This have made business distinguish in which was business and which was private. This happen particularly almost in sole trader business and partnership business.
Periodicity means the length of period that accounting did. This was same to as profit and loss account for the business. This is usually measured as twelve months. The length of time is change based on the business. If the business’s products or services techno can maintain a year then the periodicity have to be a year. If the business is change in such a few times due to customers’ like for example, fashion, then the periodicity use to be small. This can tell to what happened in the last year.
Going concern have been the simple theory for accounting. This theory is that if a company or other article will be able to remain operating for some time that was necessary to carry out its promises, objectives, duties and others. In other words, the company wouldn’t have to discharge or remain required out of business in the probable upcoming.
It is the length of business in which how much have been survive in economic. The products or services can be expired and replace by new one. So it won’t be ignored. So, these factors are somewhat that traditional article compared with anew created business.
Measurement rules point out some records and how data should register. The measurement rules are: money measurement, historic cost, realization, matching, dual aspect, and materiality.
This measurement is measure by a given monetary value. But the money’s value is changes according to time. Like when inflationary periods occur the value will goes down. Because the same amount of money just can buy less goods and services than the year before. So, like in inflationary and deflationary conditions, it’s easy to relate yearly result without effecting the money’s value whenever been higher or lower.
This is the cost that is written when the business purchase or sold. For examples, assets like car or bus and liabilities like money own by creditors are said to be historic cost. The value of assets and liabilities will transform due to impact of deflation and inflation.
Realization means that if the orders are not given to customers we don’t take place that product and money in account. But if the orders once reach to customers the product and money will add into the account.
The matching rule is as the following:
All business matter needs recordation in two different ways. This may be double entry accounting. Which it required all accounting outlines to form consistent financial statements. It contains giving statements and receiving statements from someone to another. The theory rule is that every transaction twice even if it is internal transaction.
Materiality means the accounting standard can be ignored if there is just the small change so the financial statements can’t be lied. It is essential to workout judgment in determining whether transaction is a material.
Ethical rules tell the moral code or principles expected in preparations of accounts. Some ethical rules are consistency, objectivity, relevance and prudence.
Prudence concept may be a key in accounting principle that may sure that assets and income are not overstated and also liabilities and expenses are not inconspicuous. This is the rule that help to reserve the cautions, alert and fussy perception of the distinctive unfashionable auditor.
This means if the business use this method for one accounting then the other accounting will follow that method since it leads to harm business if they use different method in one organization.
This rule states that the manager or owner should not allow the love’s one and bias during choosing or put on the account rules. The problem help the objectivity in not letting our mind’s feelings crush a certain decision.
Relevance is important in financial statement. This concept is produced by an accounting system which means to effect on decision making of information check by someone. The correct information should be provided then the correct answer are get. So, the relevance means to place the correct amount to be the correct account.
Bank Reconciliation is the account that determined whether the accounts in cash book and bank statement are correct or not. In some organization, their bank statement and cash account are being attachment. So, as definition the bank statement and cash account have to be the same amount. But in some cases, there are some accounts that have not yet enter into cash account and there are some accounts that have not yet enter into bank statement. That’s why there can be some differences between them and that is called bank reconciliation.
Why bank reconciliation occur is because, there are some items that paid to our bank statement but not enter the cash book. And there are some items that already enter to cash book but not register into bank statement. When accountants work out to check out and comparing these two notes but find some problems. Then they have responsible upon it. Accountants are responsible for these problems and they need to find where the problem was.
Most bank reconciliation is occurred in deposit of transit. There are some cash that have recorded but not records at bank so at the end of the month, the deposit will not perform in bank statement. If there are some bank reconciliation occur the organization can enter the software module where make the list of missing checks and missing deposits will perform.
If the organization finish the bank reconciliation then keep it as record that will be great for the organization.
Control Account is the summary account for the general ledger. Control accounts maintain the correct balance of the financial statements. The purpose of control account is that when the transaction between the sales staffs and customers are provided, the sales staffs shouldn’t watch the detail accounting. Only the sales manager and general manager need to watch it. So, the control account was provided.
It is generally to keep the ledger nicer and cleaner but not details that have the correct balances. Many accounts in the financial statements that have seen are control accounts. Because behind it there are much more calculation that are recorded in subsidiary ledger.
In some larger organizations, the control accounts can be found as double entry system. The balances of the control accounts are taken to be the purpose of the extracting the trial balance. When the ledgers that control account is correct and concern with double entry then it is used to called “self-balancing ledgers”. And control accounts where terminology have been used are called “adjustment accounts”.
Reconciliation of control accounts
When the information are place into the accounting records, there might be some errors and omissions. So, if these kinds of staff occur the accountants need to reconcile the differences between the bank account and bank statement balances. When the ledger control account is not at its balance it shows that something was wrong in the accounting records.