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Business Accounting
As shown by the valuable results of researches on the existing records
of accounts, business accounting has traveled a long and winding path to the
present double entry bookkeeping system through much trial-and-error for hundreds
of years since the beginning of the thirteenth century (Izutani, 1980). Initially,
business accounting was formulated as an income determination system for individual
companies. With the establishment of the modern corporation system, particularly
in the first half of the 19th century, business accounting, which had been working
as the income determination system for individual companies, assumed a new role
as a social control system, i.e., the distributable income determination system
to "protect creditors" (Littleton, 1933, pp. 242).
 Today,
individual departments within an organization frequently require financial
information that is tailored for their operations. According to David (2002),
one size does not fit all when it comes to financial information. Financial
information systems should provide a system wherein the details roll up to summarize
the information and the information used for decision making is consistent with
and reconciled with the organization’s financial records.
David (2002) lists the elements of the hierarchy of financial needs as follows:
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Budget Information – this element is
the foundation of the hierarchy. It provides data on the amount of money
available for expenditure on a program, project, or service.In addition,
it provides revenue projections for which money is expected to be available
for expenditures. |
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Status of Funds – this element is the
second element of the hierarchy. It provides financial information as to
where an organization or department stands in relation to expenditures/obligations
and the budget’s remaining balance.In addition, it provides information
on revenue receipts in comparison to the projected budgeted revenue. |
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Cost Management – provides information
on resource use by program, project or service, irrespective of the source
of funds. According to David (2002), most financial systems do not provide
a cost management system.Therefore, the need exists to have cost management
as part of the financial system in order to provide resource use for individual
programs, projects, and services. |
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Cost/Performance – this element is considered
to be the top of the hierarchy. It intersects the cost of services, programs,
and projects with their respective performance levels. Thus, it notes the
relationship of service, program, or project results with the cost for attaining
these results. |
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