Accounting and Bookkeeping

Question: Discuss about the Accounting and Bookkeeping. Answer: Introduction: Book keeping make use of centralized book and it is a system, which encompasses the use of central book for maintaining records and data. The bookkeeping has been a very traditional technique. Accounting on other side makes use of a very comprehensive system, which is used to collect and analyze the financial information available. Now a day, the process of documentation is becoming very sophisticated in terms of various financial metrics (Accounting tools. 2016). Discussion: Similarities Between Book Keeping and Accounting Roles: Both the method uses make use of the financial data. The accountant can perform the function of the bookkeeper. Therefore, an accountant can be the bookkeeper at the same time. He can handle the task of bookkeeper while handling the financial transaction of the company. The use of bookkeeping or accounting system depends on the type and nature of the business. If the business operates on small scale, then the bookkeeping method would be sufficient which requires accounts based on spreadsheets and handwritten ledgers. If the business operates on large scale, then the use of accounting system which is computerized would have advantage over maintain the accounts manually. Differences Between Book Keeping and Accounting: Book keeping expedite the general process of record keeping and it involves the day-to-day technique. The sources of the revenue and expenses, which forms a part of ledger entry, are the input of this system. Accounting on the other hand is a broader concept and involves complex documentation procedures. Verification of income, processing of taxation and invoice forms the component of the accounting system. Job of a bookkeeper is to keep the track of the records of the expenditure of the company, monitoring the cash flow and facilitating the activities related to finance. On the other hand, al the financial functions are performed by the accountant. He is responsible for correcting, updating and reporting the various accounts of the organization. Accountants are qualified to handle all the accounting process but the bookkeeper can handle the recording of the financial transactions (Staff, 2012). Advantages of Bookkeeping: Bookkeeping is very cost effective and it is cheaper for the organization to hire the service of the bookkeeper. Bookkeeping is also time effective as the bookkeeper is flexible and it meets the schedule of the business and produce the report on time. If the activity of bookkeeping is outsourced, the business can gain the knowledge of the expertise (Li, 2013). Disadvantages of Bookkeeping: There is a chance of occurrence of fraud if the bookkeeper appointed has a criminal background or if he has not been appointed in good faith. The accuracy of the financial statements of the company may get affected if the bookkeeper commits mistake in typing. Sometimes it is viewed by the businesses that the money and time spent on hiring the bookkeeper is not advantageous, as he does not contribute directly to the income of the business (Hartley, 2014). Advantages of Accounting: The business is able to get important financial information with the help of accounting technique. The financial performance of the organization is evaluated using accounting process. In order to project the health of the organization, accounting makes use of financial documentation. The figures of the financials data are projected and it is informed to the shareholders of the company. Accounting enables the tracking of the financial statements and the balance sheets. It is easier than bookkeeping, which requires manually making records of the data. If the business makes use of the computerized system of accounting, then the chances of committing error would be less (Atrill et al., 2014). Disadvantages of Accounting: The costs of making the use of accounting system are comparatively higher than the bookkeeping system. The package of the accounting system needs to be changed with changing business needs. Recommendations: Here, Abby and Luci own a medium sized company, which is on the path of expansion. It would be better for them to appoint method of accounting to handle the financial workloads. Due to expansion, the business would have complex financial data, which needs to be monitored and provide accuracy in financial reporting to avoid any hassles and error in drawing the report. It, would be advisable to appoint accounting system rather than bookkeeping Conclusion: Depending upon the size of the business, it would be suitable for the sisters to appoint the accountants for handling the financial transactions of their business. Since the business is expanding and the day to day, the tasks of handling the accounts would get complex so it would be better for them hire the service of accountants instead of bookkeeper. The business is expanding and is faced with the increased accounting workload so regarding this situation; accountant would handle the increasing task of accounts. Introduction: Ethical dilemma is regarded as a situation involving mental conflict between two options and if the person selects one then it leads to transgressing another. In order to solve ethical dilemma, it is required to develop a systematic approach. In addition, this dilemma can be solved using Langenderfer and Rockness model (Billiot et al., 2012). Body: Lagenderfer and Rocknesss model make use of systematic approach to solve ethical dilemmas. In order to evaluate the ethical situations, this model makes use of model involving five-step decision and the steps are as follows: Determine the facts- In the first step of ethical decision-making model, the individual is required to contemplate what is to be known which helps in defining the problem. The what, when, how of the situation has to be determined. In addition, the difference of opinion and conflict of the facts are determined. Ethical issues and stakeholders are identified- The second step focuses on competing interest and different interest of stakeholders have to be considered. Diverse interest of the stakeholders is considered and for this, the user of the model has to stretch beyond accounting issues. Personal integrity, risks and harm that might be incurred, rights of different parties, justice, equality, responsibility, self-obligations and interest are included in the stakeholders interest. Internalization of the professional duties of the accountant is included in the step. Alternatives are specified- The third step of ethical decision-making model is to develop as list of alternative course of action. The range of action included in the alternative action is challenging the parameters of the scenario. The decision maker has to determine whether the alternative course of action for each alternative is beneficial, real, right, fair, and whether it is consistent with the mission of the organization. Moreover, the action is consistent with virtue of considerations. Alternatives are to be compared and consequences are assessed- In the fourth step, the alternative courses of action are assessed and whether there are any compelling alternatives is determined. The potential consequences, which might affect the interests of the shareholder, are assessed and form an essential component of the second step. The consequences include both the short and long focus and positive and negative outcomes as well. Making decision: The last step of the model involves selection of the best alternative that would balance the consequences of the actions against the rules or primary values of the decision maker. The objective is to eliminate unethical options so that the best ethical alternative is selected. The decision maker should be comfortable and confident when answering few questions before reaching the conclusion. The questions to be look for are the feeling when the decision would be printed on the newspaper and the feeling if the family would find about the decision (Saddiqui, 2016). Conclusion: The model discussed above helps the user in reaching to a conclusion, the user should be able to select alternative, the decision of the user must be definitive, and it should not be viewed in multiple ways and cannot straddle the fence. Introduction: Different types of business structure include sole traders, partnership, company and trust. One of the simplest forms of business structure is the sole trader and it is very easy and cheap to set. Moreover, all the decision about running the business is made by the trader itself. In a trust, the trustee, this can be company or individual caries, out the business for the benefit of the people. In a partnership business, all the partners are equally responsible for the managing the business and they bear an unlimited liability because of debt or any obligations. All the above comprises company which is a legal entity formed with the help of association of person. Discussion: For client A situation- the business structure suitable for this situation is partnership business. The various partners who would be running the business are Sonya, Alex and Ellise. They want to set up an advisory business and it would combine the skills of all three of them. The partners would be contributing the skills so that they are able to provide wide range of services to their client. Since the advisory business would be set up with the help of all three friends who have graduated in the same field. So here, all of them would be equally responsible for running the business. This is considered as the general partnership. For client B situation- the appropriate business structure for Roger would be sole trader. This is because Roger is the only person involved in setting up the business and he has used his own savings for buying the equipments required for running the business. The business is operated and owned by person. Roger is building his business solely after working in the factory, so it would be wise to start the business or engage in the sole trader business structure. Moreover, it is easy to set up. As the trader has the limited, resources available, so the initial capital is usually low. In setting up sole trader business, the requirement for capital at the initial level is low. Therefore, sole trader would be apt and suitable considering the situation of client B. For client C situation- since client, C includes three persons who are interested in investing in real estate property. The appropriate structure would be partnership business. Here, at least two persons are liable and responsible for carrying out the business. The partners would be working jointly and making investment together. This type of partnership is regarded as general partnership as all the partners Belle, Lance and Lon would be jointly contributing to the business. So the suitable business structure would be partnership business and all of them would be equally responsible for carrying out the business (Drury, 2013). Here the liability for all the partners are equal and is not limited to one or two persons. For client D situation- Darren James has been sole trader but he wants to include his wife in his business as it is expanding. So this situation is regarded as the partnership situation as the two partners are needed to carry out the business. Here, partnership business is appropriate for running the business because there are two persons needed and the basic criteria for this type of business structure are two persons. The appropriate business structure would be general partnership (Storey, 2016). For client E situation- here, Cecilia has a hobby of paintings, which she sells at various exhibitions along with having a full time. If Cecilia is intended to expand her business in a way so that her day job does not gets affected, so it would be appropriate for Cecilia to start her business as sole trader as she would be easily maintaining the business and it is inexpensive to set up. She would own all the business profit and there would not be any paper work. Therefore, it would be easy for her to handle sole trader business. Moreover, there would not be any tax related complications. The statutory provisions are minimal and it is regulated by government regulations. Conclusion: For each client, the business structure proposed has been justified. For the client A, partnership business would be appropriate, for client B, it would be wise for the client to engage in the sole trader business, for client C, and partnership business would be justified as per the situation. Partnership business would be appropriate for client D as he wants to include his wife in carrying out his business. Lastly, for client E, the suitable business structure would be sole trader, as she wants to carry out her business of painting along with her full time day job. Reference: Atrill, P., McLaney, E., Harvey, D. (2014).Accounting: An Introduction, 6/E(Vol. 6). Pearson Higher Education AU. Billiot, M. J., Daniel, D., Glandon, S., Glandon, T. (2012). 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