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Its function is to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions, in making reasoned choices among alternative courses of action. Accounting is also defined as the process of identifying, measuring and communicatingeconomic information to permit informed judgment and decision by users of the information. Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are in part at least of financial character and interpreting the results thereof. II. Purpose and Functions To provide quantitative, financial information about economic entities to statement usersso that they could make informed judgment and better decision.
Bookkeeping: Bookkeeping is the recording of financial transactions. Transactions include sales, purchases, income, receipts and payments by an individual or organization. Bookkeeping is usually performed by a bookkeeper. Many individuals mistakenly consider bookkeeping and accounting to be the same thing. This confusion is understandable because the accounting process includes the bookkeeping function, but  is just one part of the accounting process. The accountant creates reports from the recorded financial transactions recorded by the bookkeeper and files forms with government agencies. There are some common methods of bookkeeping such as the single-entry bookkeeping system and the double-entry bookkeeping system. But while these systems may be seen as "real" bookkeeping, any process that involves the recording of financial transactions is a bookkeeping process. A bookkeeper (or book-keeper), also known as an accounting clerk or accounting technician, is a person who records the day-to-day financial transactions of an organization. A bookkeeper is usually responsible for writing the "daybooks". The daybooks consist of purchases, sales, receipts, and payments. The bookkeeper is responsible for ensuring all transactions are recorded in the correct day book, suppliers ledger, customer ledger and general ledger. The bookkeeper brings the books to the trial balance stage. An accountant may prepare the income statement and balance sheet using the trial balance and ledgers prepared by the bookkeeper.
2. Internal users:
It helps a manager in appraising the performance of the subordinates. Research Scholars : Accounting information helps research scholars who wants to make a study into the financial operation of a particular firm. They need accounting information which will help them in evaluating past performance and future prospects of the organisation. 3. 2. 2. colleges etc. Creditors : Creditors means supplier of goods and services on credit . Accounting information helps them them to know the profitability and the financial position of the concern in which they have invested their funds. need accounting information to know how their contributed funds are being utilised. Management: Accounting information is called the eyes and ears of management. Government : Government wants to know earnings or sales for a particular period for the purpose of taxation.They need accounting information relating to current assets . schools. quick assets and current liabilities which is available in the financial statements. Employees : Employees of the organisation can get the actual information about the financial position of their organisation with the help of financial statements prepared by the accountant. Members Of Non Profit Organisations : Non profit organisations such as hospitals . clubs .1. 3. External Users of accounting information : 1. banks and lenders of money who want to know the financial position of a concern before providing loans or granting credit. four major fields . Income tax returns are examples of financial reports which are prepared with information taken from accounting. This information helps them to make decision regarding future support. 5. Owners : Business ownerswant to know whether their funds are being properly used or not. Investors : Those who want to invest money in an organisation want to know the financial health of the organisation. 4. 3.
chief financial officers. the IRS. Similarly. opportunities exist in such diverse areas as the Department of Defense. As they advance in their careers. Larger firms prefer to hire master's degree graduates. the amount of equity that can be raised is limited to the proprietor's personal wealth. or finance. and the Securities and Exchange Commission. That's the good news. The bad news is that the owner has unlimited liability for business debts. there is no distinction between personal and business income. they can become involved in operational audits and provide recommendations and plans for continued financial improvement within an organization. At the federal level. transfer to executive positions in management accounting. or become internal auditors in private firms. there are more proprietorships than any other type of business. A bachelor's degree in accounting and two years' experience is required and professional licensing is recommended. financial vice presidents. Advancement to positions with more responsibility takes one or two years. budget director. junior internal auditors. Many senior corporation executives have a background in accounting. 4. This limitation often means that the . they may advance to positions such as accounting manager. New public accountants usually work for several clients on their own or as part of a firm.Public Accountants Careers in public accounting focus on auditing and tax functions. importantly. or partners. treasurers. developing internal controls. This is the simplest type of business to start and is the least regulated form of organization. The focus is on the reporting functions within the organization to contribute to planning and decision making. and. three forms of business organization: Sole Proprietorship A sole proprietorship is a business owned by one person. Government Accountants Government accountants can work at any level of government to analyze and oversee the performance and allocation of funds. For this reason. internal auditing. or trainees for other accounting positions within a corporation. and many businesses that later become large corporations start out as small proprietorships. regulatory agencies. As they rise through the organization. This means that creditors can look to the proprietor's personal assets for payment. and a few more for senior positions. or manager of internal auditing. A management accountant also manages the reporting to stock holders. Management Accountants Management accountants often start as cost accountants. Internal Auditors Internal auditors deal with conducting compliance audits. and establishing accounting information systems. so all business income is taxed as personal income. The life of a sole proprietorship is limited to the owner's life span. The owner of a sole proprietorship keeps all the profits. and tax authorities. Some become controllers. chief cost accountant. open their own public accounting firms. managers. or corporation presidents. Those who excel may become supervisors.
formal written document. A corporation can even be a general partner or a limited partner in a partnership. Forming a corporation involves preparing articles of incorporation (or a charter) and a set of bylaws. Corporations can borrow money and own property. can sue and be sued.” or a lengthy. and the number of shares that can be issued. Partnership A partnership is similar to a proprietorship. and (3) difficulty of transferring ownership. central problem: The ability of such businesses to grow can be seriously limited by an inability to raise cash for investment. (2) limited life of the business. you must not become deeply involved in business decisions unless you are willing to assume the obligations of a general partner. including the corporation's name. and can enter into contracts. Not surprisingly. starting a corporation is somewhat more complicated than starting the other forms of business organization. In a limited partnership. Partnerships based on a relatively informal agreement are easy and inexpensive to form. except that there are two or more owners (partners). Ownership by a general partner is not easily transferred because a new partnership must be formed. A limited partner's interest can be sold without dissolving the partnership. . the primary disadvantages of sole proprietorships and partnerships as forms of business organization are (1) unlimited liability for business debts on the part of the owners. duties. Corporation The corporation is the most important form (in terms of size) of business organization in the United States. The advantages and disadvantages of a partnership are basically the same as those for a proprietorship.business is unable to exploit new opportunities because of insufficient capital. The way partnership gains (and losses) are divided is described in the partnership agreement. Ownership of a sole proprietorship may be difficult to transfer since this requires the sale of the entire business to a new owner. Because a partner in a general partnership can be held responsible for all partnership debts. and all have unlimited liability for all partnership debts. All income is taxed as personal income to the partners. This form of organization is common in real estate ventures. General partners have unlimited liability for partnership debts. its intended life (which can be forever). For most legal purposes. and the partnership terminates when a general partner wishes to sell out or dies. A corporation is a legal “person” separate and distinct from its owners. but there will be one or more limited partners who do not actively participate in the business. Based on our discussion. and it has many of the rights. The reason is that if things go badly. This agreement can be an informal oral agreement. having a written agreement is very important. and a corporation can own stock in another corporation. The articles of incorporation must contain a number of things. but finding a buyer may be difficult. all the partners share in gains or losses. the corporation is a “resident” of that state. Failure to spell out the rights and duties of the partners frequently leads to misunderstandings later on. and privileges of an actual person. These three disadvantages add up to a single. you may be deemed to be a general partner even though you say you are a limited partner. for example. and the amount of equity that can be raised is limited to the partners' combined wealth. A limited partner's liability for business debts is limited to the amount that partner contributes to the partnership. Also. In a general partnership. one or more general partners will run the business and have unlimited liability. This information must normally be supplied to the state in which the firm will be incorporated. if you are a limited partner. not just some particular share. its business purpose. such as “let's start a lawn mowing business.
The stockholders elect the board of directors. In a large corporation. For example. the General Electric Company (better known as GE) has about 10 billion shares outstanding and 4 million shareholders.. Sachs and Co. The IRS will consider an LLC a corporation. unless it meets certain specific criteria.” becoming a publicly held corporation). the limited liability for business debts. and the life of the corporation is therefore not limited. In essence. and the unlimited life of the business are the reasons why the corporate form is superior when it comes to raising cash. This is double taxation. it can sell new shares of stock and attract new investors. The bylaws may be amended or extended from time to time by the stockholders. an LLC cannot be too corporationlike. who then select the managers. 5. Management is charged with running the corporation's affairs in the stockholders' interests. stockholders control the corporation because they elect the directors. Large accounting firms and law firms by the score have converted to LLCs. The most they can lose is what they have invested. As a result of the separation of ownership and management. Accountants can specialize in different businesses or fields. it must pay taxes. one of Wall Street's last remaining partnerships. so an LLC is essentially a hybrid of partnership and corporation. or according to particular accounting functions. The goal of this entity is to operate and be taxed like a partnership but retain limited liability for owners. or it will be treated as one by the IRS. thereby subjecting it to double taxation. The relative ease of transferring ownership. The number of owners can be huge. Although states have differing definitions for LLCs. the more important scorekeeper is the Internal Revenue Service (IRS). the corporate form has several advantages. For example. . Today all 50 states have enacted laws allowing for the creation of a relatively new form of business organization. the stockholders in a corporation have limited liability for corporate debts. the bylaws describe how directors are elected. the limited liability company (LLC). In principle. Ownership (represented by shares of stock) can be readily transferred. The corporate form has a significant disadvantage. Since a corporation is a legal person. For example. money paid out to stockholders in the form of dividends is taxed again as income to those stockholders. the stockholders and the managers are usually separate groups. Goldman. As a result. LLCs have become common. meaning that corporate profits are taxed twice: at the corporate level when they are earned and again at the personal level when they are paid out. What Can You Do With a College Major in Accounting? The accounting field has a high degree of mobility potential and your advancement depends on your continued education and certification. If a corporation needs new equity. The corporation borrows money in its own name. decided to convert from a private partnership to an LLC (it later “went public. larger corporations have many thousands or even millions of stockholders.The bylaws are rules describing how the corporation regulates its own existence. Moreover.
Taylor was one of the intellectual leaders of the Efficiency Movement and his ideas.Frederick Winslow Taylor Frederick Winslow Taylor (March 20. Future US Supreme Court justice Louis Brandeis coined the term scientific management in the course of his argument for the Eastern Rate Case before the Interstate Commerce Commission in 1910. The Eastern Rate Case propelled Taylor's ideas to the forefront of the . even for the well-to-do. and was one of the first management consultants and director of a famous firm. however. Taylor used Brandeis's term in the title of his monograph The Principles of Scientific Management. Frederick W. were highly influential in the Progressive Era. 1915) was an American mechanical engineer who sought to improve industrial efficiency. Brandeis debated that railroads. published in 1911. Taylor is regarded as the father of scientific management. did not need to raise rates to increase wages. He is regarded as the father of scientific management and was one of the first management consultants. In Peter Drucker's description. though the Isaac Newton (or perhaps the Archimedes) of the science of work. Taylor. Work: Taylor was a mechanical engineer who sought to improve industrial efficiency. broadly conceived. Not much has been added to them since – even though he has been dead all of sixty years. Taylor was the first man in recorded history who deemed work deserving of systematic observation and study. On Taylor's 'scientific management' rests. laid only first foundations. 1856 – March 21. when governed according to the principles of Taylor. the tremendous surge of affluence in the last seventy-five years which has lifted the working masses in the developed countries well above any level recorded before. above all.
Scientifically select.management agenda. Discipline. so that the managers apply scientific management principles to planning the work and the workers actually perform the tasks. He proposed that there were five primary functions of management and 14 principles of management Functions of management 1. Taylor wrote to Brandeis "I have rarely seen a new movement started with such great momentum as you have given this one. to forecast and plan to organize to command to coordinate to control (French: contrôler: in the sense that a manager must receive feedback about a process in order to make necessary adjustments). 3. a clear understanding between management and workers regarding the organization's rules. Taylor's scientific management consisted of four principles: 1. Specialisation increases output by making employees more efficient. Principles of Management 1. Good discipline is the result of effective leadership. like from top to bottom in an organization. or frequently disparagingly. 2. 4. Note that responsibility arises wherever authority is exercised. This principle is the same as Adam Smith's 'division of labour'. Authority. Henri Fayol Henri Fayol (Istanbul. 4. train. 3. 5. Work: Fayolism Fayol's work was one of the first comprehensive statements of a general theory of management. Replace rule-of-thumb work methods with methods based on a scientific study of the tasks. Provide "Detailed instruction and supervision of each worker in the performance of that worker's discrete task" (Montgomery 1997: 250). as Taylorism. Unity of command. Divide work nearly equally between managers and workers." Taylor's approach is also often referred to asTaylor's Principles. 3. 19 November 1925) was a French mining engineer and director of mines who developed a general theory of business administration. 4. He and his colleagues developed this theory independently of scientific management but roughly contemporaneously. and the judicious use of penalties for infractions of the rules. 2. Managers must be able to give orders. He was one of the most influential contributors to modern concepts of management. 29 July 1841–Paris. Division of work. Authority gives them this right. 2. . Employees must obey and respect the rules that govern the organization. Every employee should receive orders from only one superior. and develop each employee rather than passively leaving them to train themselves.
High employee turnover is inefficient. Daft's text is organized around Fayol's four functions.5. Fayol's work has stood the test of time and has been shown to be relevant and appropriate to contemporary management. Each group of organisational activities that have the same objective should be directed by one manager using one plan. Scalar chain. Frank and Lillian Gilbreth Work: Time and Motion Study A time and motion study (or time-motion study) is a business efficiency technique combining the Time Study work of Frederick Winslow Taylor with the Motion Study work of Frank and Lillian Gilbreth (not to be confused with their son. The two techniques became integrated and refined into a widely accepted method applicable to the improvement and upgrading of work systems. 11. Centralisation refers to the degree to which subordinates are involved in decision making. Centralisation. The line of authority from top management to the lowest ranks represents the scalar chain. 14. Remuneration. if following the chain creates delays.. best known through the biographical 1950 film and book Cheaper by the Dozen). Communications should follow this chain. (3) leading. People and materials should be in the right place at the right time. 10. Esprit de corps. Subordination of individual interests to the general interest. However. Management should provide orderly personnel planning and ensure that replacements are available to fill vacancies. Many of today’s management texts including Daft have reduced the six functions to four: (1) planning.. Employees who are allowed to originate and carry out plans will exert high levels of effort. Stability of tenure of personnel. Equity.. 8. 9. Promoting team spirit will build harmony and unity within the organization. and (4) controlling. Managers should be kind and fair to their subordinates. Unity of direction. (2) organizing. time study developed in the direction of establishing standard times. schools and hospitals. 13. while motion study evolved into a technique for improving work methods. including banks. This integrated approach to work system improvement is known as methods engineering and it is applied today to industrial as well as service organizations. The task is to find the optimum degree of centralisation for each situation. It is particularly important that effort to be applied in motion study to ensure equitable results when time study . It is a major part of scientific management (Taylorism). 7. The interests of any one employee or group of employees should not take precedence over the interests of the organization as a whole. After its first introduction. Order. Time and motion study have to be used together in order to achieve rational and reasonable results. cross-communications can be allowed if agreed to by all parties and superiors are kept informed. Workers must be paid a fair wage for their services. Initiative. 12. Whether decision making is centralized (to management) or decentralized (to subordinates) is a question of proper proportion. 6.
Below. However. in which rules were either ill-defined or stated vaguely. the time study must be changed to agree with the new method.g. and in which the leader could change duties at any time. However. Separation of personal from official property and rights Official property rights concerning e. proposed different characteristics found in effective bureaucracies that would effectively conduct decision-making. and in which leaders could change the rules for conducting the daily work arbitrarily. control resources. Once a new work method is developed. Fixed division of labor The jurisdictional areas are clearly specified. in which the division of labor was not firm and regular. and not based on a clear hierarchical order. Weber's work was indented to supplant old organizational structures that existed in the earlier periods of industrialization. machines or tools should belong to the office or department - . position. Motion study can be considered the foundation for time study. aspects of authority like wealth. in which power and authority relations are more diffuse. heritage etc. where authority was legitimized based on other. Authority is given to officials based on their skills. This should replace a more traditional system. much of the difficulty with time study is a result of applying it without a thorough study of the motion pattern of the job. lower offices should maintain a right to appeal decisions made higher in the hierarchy. To fully appreciate and understand the work of Max Weber. protect workers and accomplish organizational goals. position and authority placed formally in each position. Max Weber's work was translated into English in the mid-forties of the twentieth century. which will be described in this article. This division of labor should minimize arbitrary assignments of duties found in more traditional structures. The time study measures the time required to perform a given task in accordance with a specified method and is valid only so long as the method is continued. and in the right of those elevated in the hierarchy to posses authority and issue commands.is used. Max Weber's model of Bureaucracy is oftentimes described through a simple set of characteristics. In fact. and each area has a specific set of official duties and rights that cannot be changed at the whim of the leader. and more individual. and not "just" see his work as a caricature of bureaucratic models. These formal rules should be relatively stable. Each characteristic is described in relation to which traditional features of administrative systems they were intended to succeed. This type of authority rests on the belief in the "legality" of formal rules and hierarchies. some characteristics of the bureaucratic model are presented. exhaustive and easily understood. and was oftentimes interpreted as a caricature of modern bureaucracies with all of their shortcomings. Rational-legal authority A bureaucracy is founded on rational-legal authority. ownership. who was a German sociologist. Learn more about Max Weber's types of authority here Creation of rules to govern performance Rules should be specified to govern official decisions and actions. one therefore has to keep the historic context in mind. This should supplant earlier types administrative systems. Hierarchy of offices Each office should be controlled and supervised by a higher ranking office. Max Weber Work: Max Weber (1864-1920). This should supplant old systems.
he viewed these elements as parts of a total system. Max Weber viewed these bureaucratic elements as solutions to problems or defects within earlier and more traditional administrative systems. . and to find creative ways to accomplish rather stable goals and targets. This should supplant more particularistic ways of staffing found in more traditional systems. and are appointed. An official is a full-time employee. Selection based on qualifications Officials are recruited based on qualifications. the bureaucratic structure would create an oppurtunity for employees to become specialists within one specific area. the employee is given tenure. rights etc. The bureaucratic structure would to a greater extent protect employees from arbitrary rulings from leaders. which protects the employee from arbitrary dismissal. to the office. After an introduction period. This should supplant more traditional systems. combined and instituted effectively. and in which employees lacked the security of tenure. in which employees' career paths were determined by the leader. and are not compensated with benefices such as rights to land. employees would have a greater possibility to act creatively within the realm of their respective duties and sub-tasks. in which personal and official property rights were not separated to the needed extent. Finally. power etc.not the officeholder. which was to be replaced by a general salary matching qualifications. People are compensated with a salary. Personal property should be separated from official property. Clear career paths Employment in the organizations should be seen as a career for officials. and anticipates a lifelong career. where officials were often selected due to their relation with the leader or social rank. and would potentially give a greater sense of security to the employees. would increase the effectiveness and efficiency of the administrative structure. Additionally. which. which would increase the effectiveness and efficiency in each area of the organization. Likewise. Benefices such as land. were also common ways of compensating people. This should supplant earlier systems. not elected. when rules for performance are relatively stable.
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