Financial accountability methods

METHODS OF ACCOUNTING / FINANCIAL ACCOUNTABILITY METHODS

Methods of accounting are the different approaches one can use to explain money received and spent. Anyone advance money or entrusted with custody of financial resources must show that the resources well utilised. He/she must explain the sources of money, how the money was spent and the results or output of the expenditure.

 

There are four main methods of accounting including;

  1. Documentary evidence
  2. Books of Accounts
  3. Financial Statements or reports
  4. Physical output or results

 

  1. Documentary evidence

This is the commonest method of explaining or accounting for money receives and/ or spent. It involves presenting financial documents to explain financial transactions that were concluded. Whenever a financial transaction is initiated, it must be accompanied by a document. Some documents are produced as the transaction is being processes. When the transaction is concluded, a document must be produced.

 

Common accountability documents include;

  1. Material/Stores Requisition
  2. Purchase Requisition
  3. Profoma Invoice/quotation
  4. Purchase Order
  5. Delivery Note
  6. Goods Received Note
  7. Inspection Note/Report
  8. Invoice
  9. Voucher
  10. Journal Voucher
  11. Accountability Form
  12. Receipt
  13. Cheque Counter-Foil
  14. Debit Note
  15. Credit Note

 

  1. Books of Accounts

This involves presenting documents to explain money received and/or spent. All concluded transactions must be documented and then recorded into their respective books of accounts using the information in the documents. For prober accountability, all transactions must be accurately recorded into their respective books of accounts.

 

The key books of accounts include

  1. Journals
  2. Ledgers

 

  1. Financial Statements/reports

When all transactions are recorded into their respective books of accounts, they are summarised, the books are closed and financial statements or reports are prepared. Financial statements show the performance of the organisation with respect to profitability, assets, liabilities and owners’ equity.

 

The key financial statements include;

a) A statement of comprehensive income, or An Income statement plus a statement showing other comprehensive income

b) A statement of changes in equity

c) A statement of financial position

 

  1. Physical Output/results

This involves the tangible items and intangible but noticeable results of money that has been spent. Instead of considering documents and books alone to explain money received and spent, one is also required to show the items on which the money was spent. If they are intangible, the impact of the activities for which money was spent must be presented.

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