Free Essay

Difference Between Double Entry Accounting and Event Based Accounting

In: Business and Management

Submitted By Tyrel2
Words 331
Pages 2
Over the last 500 years, the double-entry system of accounting has provided the accounting profession with a reliable and accurate way of tracking the economic events of companies. However, with the implementation of computer-based accounting systems over the last few decades, event based accounting has gained popularity. The theory behind event based accounting is that each business transaction can be broken down into one, or a combination of three types of events: economic, business, and information. An economic event is one in which the quantity of resources change, such as selling an item or purchasing a service. Events like receiving an invoice from a supplier, or sending out a purchase order to a vendor are examples of business events. They are necessary to the company even though they are not the monetary or physical transactions for goods or services. Tasks like creating reports and inputting new customers are considered information events. Information events provide the necessary data for the economic or business events that transpire. The double-entry system of accounting focuses on taking those separate events and aggregating them into journal entries. By aggregating them, a great deal of the total information of the event is left out. Under an event based accounting system each event is recorded with as much of the information as possible, and then stored in tables of data that allow the user to recall and compile this information into usable reports. This allows the company to use all of the information from prior events to better predict future events and manage the business. The usefulness of an event based accounting system is greater than a double-entry system because the additional information can be used throughout all aspects of the company and not simply the financial side.
Although the double-entry system of bookkeeping will continue to be an integral part of an accountant’s training and background, event based accounting systems will continue to dominate the real world applications within the profession.

Similar Documents

Premium Essay

Accounting

...Accounting is a formalised information system of recording economic events in the company that helps to obtain, process and present information as well as supports decision-making. Main reasons why it is necessary for the company to keep accounting records is to identify how much profit or loss the business has made, how much money the firm owe to someone else and how wealthy they company is. Nevertheless, the fundamental objective of accounting is to provide information for decision-making. Double-entry system Accountant to record the dual effects of each transaction uses double-entry system. As every transaction affects two items it is necessary to show these effects when recording each transaction. This stage is known as bookkeeping and the process is called double entry. Particular method follows the rule of accounting equation and maintains that every debit has a corresponding credit entry. Source documents Source documents are the original evidences in which all the information about business transactions are documented. The examples of this kind of documents are listed below. • • • • Sales invoices Cash receipts Credit notes Deposit slip Original books of entry All data from the source documents is recorded in the prime or original books of entry. 1 Books of prime enter are the journals in which we first record transactions. There are separate records for each kind of transaction that can be find......

Words: 563 - Pages: 3

Premium Essay

The Rea Accounting Model: Intellectual Heritage and Prospects for Progress

...The REA Accounting Model: Intellectual Heritage and Prospects for Progress Cheryl L. Dunn Florida State University William E. McCarthy Michigan State University Send page proofs to: William E. McCarthy Department of Accounting N270 North Business Complex Michigan State University East Lansing, MI 48824 Acknowledgments: The authors would like to acknowledge the helpful comments of three anonymous referees and the editor on two earlier versions of this paper. Helpful pointers into the literature were provided by William Schrader and Stephen Zeff. We would also like to acknowledge comments received at the Michigan State University 1995 Summer AIS Colloquium and at the 1995 Workshop on Semantic Modeling of Accounting Phenomena. Financial support was received from Arthur Andersen LLP and from the Departments of Accounting at Grand Valley State University and Michigan State University. The REA Accounting Model: Intellectual Heritage and Prospects for Progress ABSTRACT: Researchers often equate database accounting models in general and the Resources-Events-Agents (REA) accounting model in particular with events accounting as proposed by Sorter (1969). In fact, REA accounting, database accounting, and events accounting are very different. Because REA accounting has become a popular topic in AIS research, it is important to agree on exactly what is meant by certain ideas, both in concept and in historical origin. This article clarifies the......

Words: 10700 - Pages: 43

Premium Essay

Business

... * Such organizations need to take different decisions for their business activities. * Financial information is needed for decision making purpose. * Book keeping and Accounting will provide such information. * Meaning of Financial Accounting * Process of identifying, measuring, classifying, recording, summarizing and interpretation of the transactions of a business in terms of money to ascertain the result and financial position of business activities of particular period. * Accounting is the art of recording, classifying and summarizing, in a significant manner and in terms of money, transactions and events which are in the part at least, of a financial character and interpreting the results there of.- AICPA * Its features are- * Financial language * Financial information * Systematic process * Functions * Information system * The Purposes of Financial Accounting The objectives of accounting are- * To maintain records- * To generate accurate and authentic information, all the financial activities needs to be remembered which will not be possible without keeping records. As accounting helps to memorize all the transactions with records, it is the objective of accounting. * To ascertain operating results- * Accounting ascertains whether the business has earned a profit or suffered a loss by preparing profit and loss statements,...

Words: 2084 - Pages: 9

Premium Essay

The Accounting Cycle

...Accounting cycle can be defined as a sequence or process that is involved in completing the accounting process. Accounting cycle also refers to traditional procedures that performed by the company in order to record all the business transactions during the accounting periods. There are several sequences includes in the accounting cycle such as identifying, collecting and analyzing documents and business transactions, records the process in journals, posting the journalized amounts to ledger, preparing the trial balances and financial statements. Usually, an accounting cycle of the company begins when a business transaction take place and finishes the accounting cycle when the financial statements are prepared. The period of the accounting...

Words: 1750 - Pages: 7

Premium Essay

Bhbjk

... ВИКОНАЛА: ПЕРЕВІРИЛА: Харків 2012 MINISTRY OF EDUCATION AND SCIENCE, YOUNG PEOPLE AND SPORT OF UKRAINE KHARKIV NATIONAL UNIVERSITY OF ECONOMICS Department of Foreign Languages “Purpose and Principles of Accounting” “Accounting and audit” Faculty (2-2) Supervisor: Kharkiv 2012 Accountancy Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers. The communication is generally in the form of financial statements that show in money terms the economic resources under the control of management; the art lies in selecting the information that is relevant to the user and is reliable. Accountancy is a branch of......

Words: 7450 - Pages: 30

Premium Essay

Accounting Theory

...ACCOUNTING CYCLE The Series of business transactions which occur from the beginning of an accounting period to the end of an accounting period is referred any specific period of time for which a summary of business’s transaction is prepared. Steps in Accounting Cycle:1. 2. 3. Journalizing (Recording) Posting to Ledger (Classifying) Final Account (Summarizing) Now Explain Steps:1 Recording:- This is the basic function of accounting. All business transaction, as evidenced by some documents such as Sale bill, Pass book, Salary Slip ect are recorded in the books of account. This is called recording process. 2. Classifying:- All entries in the Journal or books of Original Entry should be posted to the appropriate ledger accounts to find out at a glance the total effect of all such transactions in a particular account. 3. Summarizing:- It is concerned with the preparation and presentation of the classified data in a manner useful to the Internal a well as the external users of financial statements. This process leads to the preparation of the following financial statements:a) Trial Balance b) Profit & Loss Account c) Balance Sheet d) Cash flow Statement. DIFF. BETWEEN BOOK KEEPING AND ACCOUNTING BOOK KEEPING ACCOUNTING 1. It is a Process concerned with recording of transaction. 2. It is the basic of accounting. 1. It is a process concerned with Summarizing of the recorded transaction. 2. It is the basic for business language. for accounting are 3. Person......

Words: 8181 - Pages: 33

Premium Essay

Rasd

...CHAPTER NO 1 FINANCIAL ACCOUNTING To understand the financial statements of company, one must understand first its operations. Accounting is a system the collects and processes financial information about an organization and reports that information to the decision makers. Decision makers could be internal decision makers and outsider decision makers. External decision makers are creditors, investors, suppliers and customers. Internal decision makers could be managers to make day to day operations. Balance Sheet reports financial position (assets, capital, and liabilities) of a company at a point of time. Assets: Assets are the economic resources controlled by the organization so that future benefits can be obtained. Assessment of assets is important to its creditors and to its owners because assets provide a basis for judging whether the company has sufficient resources available to operate the business. Typically, the assets of a company include the following: 1. Current assets (short-term): short term assets that transform into cash and within the next year or the operating business cycle of the company. a. Cash and cash equivalents: Highly liquid assets, that can be easily convertible to cash such as bonds, marketable securities. b. Short-term investments: represents the reported values of shares of other companies as investment of access cash c. Trade receivables: When a company sells it products on credit, and receives......

Words: 4241 - Pages: 17

Premium Essay

Frcc

...Chapter – 1 Introduction to Accounting Origin and history of Accounting can be traced back to some 10,000 years ago. The population in the area known as Mesopotamia, later Persia, and today the countries of Iran and Iraq had an active trading between towns and cities up and down the two rivers started the accounting concepts. At that time there were no letters or numbers. The merchants had to ship their merchandise up and down the rivers. They have to trust the boat man with their goods. There were a lot of disagreements about how much was shipped versus what was received at the other end between the merchants and the shippers. To deal such problem, merchants came up with small clay tokens, in various shapes and with various markings, to indicate different products, which would mean a basket of grain, another would mean a pot of oil, etc. They had over 200 such tokens to indicate a large variety of common goods, including food, leather, clothing, utensils, tools, jewelry, etc. Before shipping their goods, a merchant would take one token for each item in the shipment, and encase the tokens in a ball of clay, called a "bollae" (pronounced "bowl-eye") - meaning ball. The ball would be dried in the sun, given to the boatman, and then broken by the buyer on the other end of the transaction. The buyer would match the tokens with the items in the shipment, to verify that everything sent was accounted for. Early references to accounting concepts are found in the......

Words: 18820 - Pages: 76

Premium Essay

Accounting Terms

...Accounting Terms Chapter 1 Accounting- Information and measurement system that identifies records and communicates relevant information about a company’s business activities Accounting equation- equality involving a company’s assets liabilities and equity, assets equal liability plus equity/ aka balance sheet equation Assets- resources a business owns or controls that are expected to provide current and future benefits to the business Auditors- An individual who checks the accuracy, fairness, and general acceptability of accounting records, an external auditor would attest to those checks Balance sheet- Financial statement that lists types and dollar amounts of assets, liabilities, and equity at a specific date Bookkeeping- part of accounting that involves recording transactions and events. Either manually or electronically(record keeping) Business entity assumption- Principle that requires a business to be accounted for separately from its owners and from any other entity Common stock- Corporations basic ownership share aka capital stock Conceptual framework- system of interrelated objectives and fundamentals, disseminated by accounting regulators such as the FASB or IASB intended to guide consistent standard setting ad aid accounting practitioners Contributed capital- Total amount of cash and other assets received from stockholders in exchange for stock aka paid in capital Corporation- Business that is a separate legal entity under state or federal laws with......

Words: 2015 - Pages: 9

Premium Essay

Accounting Fraud

...ACCOUNTING PROCEDURES AND RECORDING PROCEDURES IN THE EARLY ISLAMIC STATE OMAR ABDULLAH ZAID UNIVERSITY OF BAHRAIN ACCOUNTING HISTORIANS JOURNAL VOL 31, NO 2 Abstract: Despite advances in historical knowledge the precise origins of accounting systems and recording procedures remain uncertain. Recently discovered writings suggest that accounting has played a very important role in various sections of Muslim society since 624 A.D. This paper argues that the accounting systems and recording procedures practiced in Muslim society commenced before the invention of the Arabic numerals in response to religious requirements, especially zakat, a mandatory religious levy imposed on Muslims in the year 2 H. INTRODUCTION In an influential contribution Parker [2000] wrote that "the writing of accounting history is increasingly dominated by writers in English discussing private-sector accounting in English-speaking countries of the 19th and 20th centuries ... the scope of accounting history is much wider than this" [p. 66]. This paper seeks to further advance our increasing knowledge of the history of accounting outside English-speaking countries in periods earlier than the modern era. It also contests de Ste. Croix's claim [1981, p. 114] that "there seems to have been no really efficient method of accounting, by double or even single entry, before the thirteenth century". Analysis of medieval bookkeeping systems in Muslim society throws doubt on this assertion. The paper seeks......

Words: 10626 - Pages: 43

Premium Essay

Accounting World

...ACCOUNTING Evolution: Accounting can be traced back to the evolution of the number system itself. It has been there in one form or the other, since the human beings started exchanging things. In ancient times the “kings” or “monarchs” used to maintain “treasury records”. They used to keep records of the incomes and expenses to the treasury. However, the real beginning can be traced to the reference to double entry system in the book published about 500 years ago. It was the great Italian Mathematician, Luca Pacioli, who authored the book and got it published in 1494. Every transaction has two aspects. The double entry system provides for recording both aspects of a transaction in such a manner as to establish an equilibrium. Barter System: A system, in which goods are exchanged for goods, is called “Barter System”. For example, A to A has some surplus wheat and he wants to have a goat. A to B has some goats and he wants some wheat. Now, when they meet, the wheat is exchanged for goat .This is called “Barter”. This system of exchange was prevailing before the invention of money. Money: In order to overcome the limitations of barter system the “money” was invented. Money is a medium of exchange. In ancient times a piece of leather served as money. Later, gold coins, copper coins, iron coins with the stamp of the King etc., were used as money. In the modern times, paper money is used. For example, Rupees, dollars etc., in the form of printed paper act as money. Now A...

Words: 13188 - Pages: 53

Premium Essay

Financial Accounting

...FFA PAPER F3 FINANCIAL ACCOUNTING BPP Learning Media is the sole ACCA Platinum Approved Learning Partner – content for FIA and ACCA qualifications. In this, the only FFA/F3 study text to be reviewed by the examiner:        We highlight the most important elements in the syllabus and the key skills you will need We signpost how each chapter links to the syllabus and the study guide We provide lots of exam focus points demonstrating what the examiner will want you to do We emphasise key points in regular fast forward summaries We test your knowledge of what you’ve studied in quick quizzes We examine your understanding in our exam question bank We reference all the important topics in our full index I N T E R A C T I V E T E X T BPP’s Practice & Revision Kit, i-Pass and Interactive Passcard products also support this paper. Note FIA FFA and ACCA Paper F3 are examined under the same syllabus and study guide. FOR EXAMS FROM FEBRUARY 2013 TO JANUARY 2014 FFA/F3 FINANCIAL ACCOUNTING First edition March 2011 Second edition September 2012 ISBN 9781 4453 9966 9 Previous ISBN 9781 4453 7305 8 eISBN 9781 4453 9242 4 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Published by BPP Learning Media Ltd BPP House, Aldine Place 142-144 Uxbridge Road London W12 8AA www.bpp.com/learningmedia Printed in the United Kingdom by Printers Polestar Wheatons Hennock Road Marsh Barton Exeter EX2 8RP Your...

Words: 166751 - Pages: 668

Premium Essay

Accounting

...Credits If the words "debits" and "credits" sound like a foreign language to you, you are more perceptive than you realize—"debits" and "credits" are words that have been traced back five hundred years to a document describing today's double-entry accounting system. Under the double-entry system every business transaction is recorded in at least two accounts. One account will receive a "debit" entry, meaning the amount will be entered on the left side of that account. Another account will receive a "credit" entry, meaning the amount will be entered on the right side of that account. The initial challenge with double-entry is to know which account should be debited and which account should be credited. Before we explain and illustrate the debits and credits in accounting and bookkeeping, we will discuss the accounts in which the debits and credits will be entered or posted. Note: We developed a visual tutorial of debits and credits as well as hundreds of exam questions to help you review and retain the information that follows. See AccountingCoach PRO to learn more. What Is An Account? To keep a company's financial data organized, accountants developed a system that sorts transactions into records called accounts. When a company's accounting system is set up, the accounts most likely to be affected by the company's transactions are identified and listed out. This list is referred to as the company's chart of accounts. Depending on the size of a company and the complexity......

Words: 10337 - Pages: 42

Premium Essay

Legality and Ethicality of Corporate Governance

...Comparing IFRS to GAAP Lartarsha Thomas Nicholas Mays Melony Soto-Gonzalez ACC/291 2/22/2015 It is important to know about the two main accounting systems, which are Generally Accepted Accounting Principles (GAAP) and International financial Reporting Standards (IFRS). These systems are used everywhere. All the accounting systems follow double-entry practices that categorize transactions as revenue or expenses, assets or liabilities. GAAP and IFRS have a few differences and it is important to know the differences. In order for our team to have a better understanding of IFRS and GAAP, we kept the following in mind. What are some steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed? The steps taken to move fair value measurement for financial instruments are: 1) disclosure of fair value for information in the notes. 2) fair value option which permits but does not require companies to record some types of financial instruments at fair values in the financial statements. The approaches differs in both boards facing bitter opposition from various factions. The boards have adopted a piecemeal approach. Different assets, liabilities, and equity instruments are measured at fair value. The standards in U.S. GAAP and IFRS that require or permit fair value measurements are different. As a consequence, an asset, liability, or equity instrument that is measured at fair value in U.S....

Words: 1016 - Pages: 5

Premium Essay

Audit Working Papers

...Sector Accounting - An Interdisciplinary Field Involving Accounting, Economics, and Jurisprudence 1 Ryosuke Tao Research Fellow, Institute of Administrative Management Abstract Public sector accounting has recently been improved. Currently, there are requirements to disclose stock information in addition to the flow information presented in budget statements or accounts statements. Public sectors have prepared and disclosed their financial statements (including balance sheets and income statements) based on business accounting approaches. Moreover, as a matter of policy, the government tends to prepare and disclose cost information along with the financial statements for the individual ministries and governmental agencies. The objectives of clarifying the fiscal conditions in a state through the preparation and disclosure of financial statements are to fulfill the state’s accountability to its citizenry and market participants and to optimize and enhance the efficiency of its fiscal activities. Most importantly, the improved information should contribute to democratic decisions on public finance. A perspective different from the business accounting is that public sector accounting places more emphasis on inter-generational fairness. With respect to the inter-generational benefits and burdens, however, various factors must be considered, and the differences between assets and liabilities in the balance sheet may not be the indicators for that purpose. Public sector......

Words: 10883 - Pages: 44