An accounting record refers to the documentation and books kept for the purpose of making financial statements and records kept for auditing purposes and financial review. Accounting records can be in the form of a flowchart which is a pictorial representation that shows the procedure followed within an organization. The flow chart that Kingsmead Plc. can follow in the purchase of a new computerized accounting software is as follows:
The flow chart follows a systematic way from the time the order is placed to the time it is received. The first stage is the authorization of the purchase by the relevant person in the firm followed by placing an order for the purchase, which is issuing invoices. Sequential numbering of invoices is necessary for ease of record keeping and for audit purposes. It is followed by approval,. i.e. initiating of signs to authenticate the invoices. Adherence to authority limits should be observed in order to be in line with company rules (Alan Reynolds 2002). Notes about goods received should be checked for proper recording and matching against purchase orders.
The fundamental accounting concepts refer to the basic rules and regulations to be incorporated in the new computerized system. It should show materiality because of the importance of an amount, transaction or discrepancy. Something is said to be material if its omission would dramatically affect the operations of a business. Therefore, the system should be in apposition to differentiate material transaction from immaterial transaction. The other concept that should be incorporated in the software is that of consistency (Phillip Lipton & Abe Herzberg 2001). This means that the firm has to be consistent in the application of the accounting principles and all the accounting standards without changing them regularly. For example, the firm should use only one method of providing for depreciation, such as the straight line method. The other concept that should be incorporated is that of the matching concept. It is a principle based on accrual and revenue recognition. The system should be in a position to record an accrual when it has been incurred rather when it is paid while the revenue should be recorded when it is earned rather when it is received (Marjorie Kelly 2002). The other concept that should be incorporated is that of time period. This means that the system should record a transaction within a period it pertains to. Transaction of one accounting period should not be recorded in another financial period.