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C3-System (Operation of accounting systems (Conversion of transactions…
C3-System
Operation of accounting systems
Conversion of transactions into debit and credits
Bookkeeping mechanisms
Documents
Record books
Ledger accounts
Bookkeeping rules
Directions on how to use the mechanisms
Rules for revising data produced in initial classification(Reclassification)
Useful for separating accounting facts as between fiscal periods
Purpose
distinguish between fiscal periods
For periodic adjustments and closings
distinguish between separate production activities
For costing accounting
between periods or between departments
Intro
Nature of accounting
Raw data are economic facts
Method is primarily statistical
Idea
Accounting classifies in order to compress
Simplify large mess of raw data
Make it understandable by putting it in order
Direct result
Financial statements
Accounting systems do the job of compression
Recording function alone is a minor importance
There are many other efficient ways
Compressing large messy data into understandable bits is more important
Summary
Ideas
Many features are very old
Effective categories were laid down a long time ago
Over 500 years ago
Well suited to changes and basic needs of a business
Accounting method was flexible enough to survive
One single mechanism(Termed: Accounting System)
Mechanisms
Accounting devices
Bookkeeping rules
Personnel organizations
Transactions
Planned and orderly means of classification
Help integrate and compress any amounts of data
Good to use similarity but cannot be forced
Some should be based on managerial needs
Individually can cause accounts to be deceptive
Even though heavy individual views are also undesirable
Can't be too uniform or too individual