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Financial System and Auditing

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Introduction To Accounting Concepts

Accounting is an integral part of any form of business activity. The purpose of maintenance of books of account in business is to keep a systematic record of transactions that have taken place within the commercial enterprise. Proper books of account shall be maintained with respect to sales, purchases, assets, liabilities, incomes and expenses. The primary responsibility of the maintenance of books of accounts rests with the managing directors or finance managers of an entity or any other authorized person by the directing authority in his behalf. Any default in the maintenance of books of accounts may associate with it's legal consequences both for an entity as well as for the person who is entrusted with the responsibility for its maintenance. Therefore, it is the prime duty of responsible authorities to ensure the proper preparation and maintenance of books of accounts.

Purpose and use of different accounting records

Accounting records are maintained to facilitate the provisioning of complete and systematic records of all transactions that are taking place within business. These records are prepared in respect of purchase, sales, receipts, expenses, assets and liabilities of the business as well as it includes journals, ledgers, trial balance, income statement and balance sheets. All these statements serve different purposes both for the business as well as for the different stakeholders who have diversified interests in business. A brief insight of these accounting records and the purpose they serve has been given in the underneath paragraphs:

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Journal vouchers- They are the initial documents from which recording of the transactions takes place. These documents are maintained in a chronological order with the recording of each and every transaction that is taking place from time to time in the routine course of business operations. These records are maintained on double entry basis with one item which is representing debit and the other item which shows credit thereby maintaining proper balance between them (Alexander and Archer, 2000). They are the source documents from which the different items are carried to their respective ledger accounts in order to ascertain the underlying balance of each of these

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