Basic elements of a financial accounting system

There are three (3) basic elements:

       Rules

       Framework

       Controls

Rules

       Rules are vital for an entity's economic

   events to determent what ,when and

   how much should be recorded.

       Rules are originated from the eight

   concepts of  accounting

   (Warren, 2009, p.46).

       Accounting rules are called:

   Generally accepted accounting principals

   (GAAP) (Warren, 2009, p.21).    

Framework

       Framework is needed to analyze, record

   and summaries  transactions, to facilitate

   the preparation of financial statements.

       The starting point for designing a  

   framework is the accounting equation:

     Assets = Liabilities + Stockholders’ Equity 

       Framework integrates the accounting  

  equation with cash flow statement and 

  income statement (Warren, 2009, p.47).

Controls

       Controls are built in integrated financial  

   statement

       Controls are needed to ensure the accuracy

   of transactions’ recordings

   (Warren, 2009, p.47).

        The importance of basic elements        

                       Basic elements of accounting system are  

  very important and apply to any and all  

  business (small and big)

  (Warren, 2009, p.46).

   References 

      Warren, S. C.( 2009).Survey of accounting.

   4th ed. Ohio: South-Western Cengage learning