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Assignment on ACC.101
QUESTION (1)
WRITE ON THE HISTORICAL DEVELOPMENT OF ACCOUNTING SINCE 14 CENTURY
(A) WHAT WAS THE CONTRIBUTION OF LUCA PACIOLI TOWARDS THE DEVELOPMENT OF ACCOUNTING.
(B) WHAT DID LUCA PACIOLI SAID ABOUT ITALIAN METHOD OF ACCOUNTING.
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QUESTION 2
WHAT IS ACCOUNTING
(2A) WHAT ARE THE IMPORTANCE OF ACCOUNTING TO THE SOCIETY .
QUESTION 3
WHAT ARE THE DIFFERENCE BETWEEN ACCOUNTING AND BOOK KEEPING.
Note: All should be hand written with capital letters using 80 leaves note book either long or short.
To be submitted next week Friday before lecture.
Answers
ASSIGNMENT ON ACC 101
QUESTION 1: HISTORICAL DEVELOPMENT OF ACCOUNTING SINCE THE 14TH CENTURY
Accounting has been in existence for centuries, evolving as trade and business grew. Before the 14th century, businesses used simple record-keeping methods. Merchants and traders would record their transactions on clay tablets, papyrus, or simple ledgers. However, as business activities expanded, there was a need for a more structured way of keeping financial records.
By the 14th and 15th centuries, trade and commerce had grown significantly in Europe, especially in Italy. This led to the development of the double-entry bookkeeping system, which became the foundation of modern accounting.
(A) CONTRIBUTION OF LUCA PACIOLI TOWARDS THE DEVELOPMENT OF ACCOUNTING
Luca Pacioli, an Italian mathematician and Franciscan monk, is known as the “Father of Accounting.” In 1494, he published a book titled Summa de Arithmetica, Geometria, Proportioni et Proportionalita, which contained a detailed explanation of the double-entry bookkeeping system used by Venetian merchants. His contributions include:
1. Introducing the Double-Entry System – He explained how businesses should record transactions using debits and credits to maintain balance.
2. Emphasizing Financial Statements – He described the importance of preparing financial records such as ledgers, journals, and balance sheets.
3. Standardizing Accounting Practices – His work provided a clear guideline that helped improve the accuracy and reliability of accounting records.
(B) WHAT LUCA PACIOLI SAID ABOUT THE ITALIAN METHOD OF ACCOUNTING
Luca Pacioli described the Italian method of accounting, which was the double-entry system, as the best way to keep business records. He emphasized that:
1. Every transaction must have two sides – A debit and a credit, ensuring that the books always balance.
2. Accurate record-keeping is key to financial success – Business owners must maintain well-organized financial statements.
3. Using ledgers and journals helps prevent errors – Each entry must be recorded properly to avoid mistakes in calculations.
His ideas laid the foundation for modern accounting principles and are still in use today.
QUESTION 2: WHAT IS ACCOUNTING?
Accounting is the process of recording, summarizing, analyzing, and reporting financial transactions of a business or organization. It helps individuals and companies track income, expenses, and overall financial health. Accounting provides essential financial information that helps businesses make decisions, comply with regulations, and assess performance.
(2A) IMPORTANCE OF ACCOUNTING TO SOCIETY
1. Helps Businesses Manage Finances – Accounting allows businesses to track their profits, losses, and expenses.
2. Ensures Proper Tax Payment – Governments use accounting records to calculate and collect taxes.
3. Prevents Fraud and Mismanagement – Proper record-keeping helps detect errors and financial mismanagement.
4. Assists in Decision-Making – Investors and managers rely on accounting information to make informed financial decisions.
5. Promotes Economic Growth – Accurate financial records encourage business growth, leading to job creation and economic stability.
6. Improves Creditworthiness – Banks and financial institutions check accounting records before giving loans.
QUESTION 3: DIFFERENCE BETWEEN ACCOUNTING AND BOOKKEEPING
Accounting and bookkeeping are closely related but have key differences:
1. Bookkeeping is the process of recording financial transactions, while Accounting involves analyzing, summarizing, and interpreting those records.
2. Bookkeeping is clerical and focuses on daily financial transactions, while Accounting is analytical and focuses on the overall financial health of a business.
3. Bookkeeping does not require special skills, while Accounting requires knowledge of financial principles and rules.
4. A bookkeeper records transactions in ledgers and journals, while an accountant prepares financial statements and helps with business decisions.
CONCLUSION
Accounting has a long history, dating back to the early days of trade and commerce. The contributions of Luca Pacioli in the 15th century helped shape modern accounting practices. Today, accounting plays a vital role in business and society, ensuring financial transparency, decision-making, and economic growth. Understanding the difference between bookkeeping and accounting helps in appreciating the importance of financial management in any organization.