ACCOUNTING PROCEDURE Meaning and
Definition
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Accounting procedure refers to a set of established rules and guidelines that govern the recording, processing, and reporting of financial transactions within an organization. It provides a standardized framework for managing and documenting financial activities, ensuring accuracy, consistency, and transparency in financial reporting.
The primary objective of accounting procedures is to establish a systematic approach to record and analyze business transactions. These procedures enable organizations to maintain an accurate and up-to-date record of their financial activities, which is crucial for making informed business decisions, monitoring financial performance, complying with legal and regulatory requirements, and facilitating audits.
Accounting procedures typically encompass various aspects of the financial management process, including the creation and implementation of financial policies, the identification and classification of financial transactions, the documentation and recording of transactions using standardized accounting tools such as journals and ledgers, the reconciliation of accounts, the preparation of financial statements, and the interpretation and analysis of financial data.
Adherence to accounting procedures promotes consistency and comparability in financial reporting, allowing stakeholders such as management, investors, creditors, and regulators to assess the financial health and performance of an organization accurately. It facilitates the identification of errors, irregularities, or discrepancies in financial records, enabling timely corrective actions to be taken. Additionally, accounting procedures foster accountability and transparency, as they detail the roles, responsibilities, and processes involved in financial management, promoting sound financial governance within an organization.
Etymology of ACCOUNTING PROCEDURE
The word "accounting" is derived from the Old French word "accounter", which means "to reckon" or "to bring to account". It further originates from the Latin word "computare", meaning "to calculate".
The word "procedure" comes from the Old French word "proceder", which is derived from the Latin word "procedere" meaning "to go forward" or "to proceed".
Therefore, the etymology of the term "accounting procedure" combines the Latin roots of "computare" (meaning "to calculate") and "procedere" (meaning "to go forward" or "to proceed"), emphasizing the systematic steps taken to calculate and record financial transactions.
