Page 136 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 7: Accounting for Banking Companies

The September 2010 intervention caused a variety of reactions across the world. This case notes
analyses the complete story of Japanese intervention including the political and economic
situation during the intervention period. A parallel approach is used to critically analyse
the relevance of such interference in the present globally integrated market structure.
Source: http://www.ibscdc.org/Case_Studies/Finance,%20Accounting%20and%20Control/Investment%20and%20Banking/INB0016.htm

7.2 Basics of Banking accounts

The accountants design the accounting systems the bookkeepers use. They establish the internal
controls to protect resources apply the principles of standards-setting organisations to the
accounting records and prepare the financial statements, management reports and tax returns
based on that data. The auditors that verify the accounting records and express an opinion
on financial statements are also accountants, as are management, tax and forensic accounting
specialists.

Notes A bank cannot acquire certain assets but it can always lend against the security
of such assets.

7.2.1 the Difference between accounting and Bookkeeping

Bookkeeping is an unglamorous but essential part of accounting. It is the recording of all the
economic activity of an organisation – sales made, bills paid, capital received – as individual
transactions and summarising them periodically (annually, quarterly, even daily). Except in the
smallest organisations, these transactions are now recorded electronically; but before computers
they were recorded in actual books, thus bookkeeping.

7.2.2 Double-entry Bookkeeping

The economic events of a business are recorded as transactions and applied to the accounts
(hence accounting).

Example: The cash account tracks the amount of cash on hand; the sales account records
sales made. The chart of accounts of even small companies has hundreds of accounts; large
companies have thousands.
The transactions are posted in journals, which were (and for some small organisations, still are)
actual books; nowadays, of course, the journals are typically part of the accounting software.
Each transaction includes the date, the amount and a description.

Example: Suppose you have a stationery store. On April 19, a saleswoman for an antiques
company visits you, and you buy a lamp for your office for $250. A journal entry to record the
transaction as a debit to the Office Furniture account and a $250 credit to Accounts Payable could
be written as follows (Dr. is the abbreviation for debit, while Cr. is for credit):
Date Account Dr. Cr.
April 19 Office Furniture 250
Accounts Payable 250
(Bought antique lamp; voucher #0016)
Each accounting transaction affects a minimum of two accounts, and there must be at least one
debit and one credit.

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