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Introduction

Accounting control
Accounting control is the methods and procedures that are implemented by a firm to help ensure the
validity and accuracy of its financial statements. The accounting controls do not ensure compliance with
laws and regulations, but rather are designed to help a company comply.
Internal control procedures in accounting can be broken into seven categories, each
designed to prevent fraud and identify errors before they become problems.
 Separation of Duties :
Separation of duties (SoD; also known as Segregation of Duties) is the concept of having more
than one person required to complete a task. In business the separation by sharing of more than one
individual in one single task is an internal control intended to prevent fraud and error. The concept is
alternatively called segregation of duties or, in the political realm, separation of powers.
In democracies, the separation of legislation from administration serves a similar purpose. The
concept is addressed in technical systems and in information technology equivalently and generally
addressed as redundancy.
Separation of duties is a key concept of internal controls. Increased protection from fraud and errors
must be balanced with the increased cost/effort required. Separation of duty, as a security principle,
has as its primary objective the prevention of fraud and errors. This objective is achieved by
disseminating the tasks and associated privileges for a specific business process among multiple
users. This principle is demonstrated in the traditional example of separation of duty found in the
requirement of two signatures on a cheque.
 Access Controls :
 Geographical access control may be enforced by personnel (e.g., border
guard, bouncer, ticket checker), or with a device such as a turnstile. There may be fences to avoid
circumventing this access control. An alternative of access control in the strict sense (physically
controlling access itself) is a system of checking authorized presence, see e.g. Ticket controller
(transportation). A variant is exit control, e.g. of a shop (checkout) or a country.
 Physical Audits :
A Physical Configuration Audit (PCA) is the formal examination of the "as-built" configuration of a
configuration item against its technical documentation to establish or verify the configuration item's
product baseline. The PCA is used to examine the actual configuration of the Configuration Item (CI)
that is representative of the product configuration in order to verify that the related design
documentation matches the design of the deliverable CI. It is also used to validate many of the
supporting processes that the contractor uses in the production of the CI. This is also used to verify
that any elements of the CI that were redesigned after the completion of the Functional Configuration
Audit (FCA) also meet the requirements of the CI's performance specification. Additional PCAs may
be accomplished later during CI production if circumstances such as the following apply:
 The original production line is "shut down" for several years and then production is restarted.
 The production contract for manufacture of a CI with a fairly complex, or difficult-to-manufacture,
design is awarded to a new contractor or vendor.

 Standardized Documentation:
 The documentation accompanying a piece of technology is often the only means by which the user
can fully understand said technology; regardless, technical documentation is often considered a
"necessary evil" by software developers. Consequently, the genre has suffered from what some
industry experts lament as a lack of attention and precision.[4] Writing and maintaining documentation
involves many technical and non-technical skills, and this work is often not enjoyed or rewarded as
much as writing and maintaining code.
 Trial Balances :
 A trial balance is a list of all the general ledger accounts (both revenue and capital) contained in
the ledger of a business. This list will contain the name of each nominal ledger account and the
value of that nominal ledger balance. Each nominal ledger account will hold either a debit balance or
a credit balance. The debit balance values will be listed in the debit column of the trial balance and
the credit value balance will be listed in the credit column. The trading profit and loss statement
and balance sheet and other financial reports can then be produced using the ledger accounts listed
on the same balance.
 Periodic Reconciliations :
 Reconciliation is an accounting process that uses two sets of records to ensure figures are
correct and in agreement. It confirms whether the money leaving an account matches the
amount that's been spent, and making sure the two are balanced at the end of the recording
period.
 Approval Voting :
Approval voting is a single-winner electoral system where each voter may select ("approve") any
number of candidates. The winner is the most-approved candidate.
Robert J. Weber coined the term "Approval Voting" in 1971. Guy Ottewell described the system in
1977. It was more fully published in 1978 by political scientist Steven Brams and
mathematician Peter Fishburn.
The main principles Accounting Control and Accounting
Techniques
 Corporate social responsibility :
 Corporate social responsibility (CSR, also called corporate sustainability, sustainable
business, corporate conscience, corporate citizenship or responsible business)[1] is a type of
international private business self-regulation.[2] While once it was possible to describe CSR as an
internal organisational policy or a corporate ethic strategy[3], that time has passed as various
international laws have been developed and various organisations have used their authority to push
it beyond individual or even industry-wide initiatives. While it has been considered a form
of corporate self-regulation[4] for some time, over the last decade or so it has moved considerably
from voluntary decisions at the level of individual organisations, to mandatory schemes at regional,
national and even transnational levels.
 Considered at the organisational level, CSR is an organisational policy. As such, it must align with
and be integrated into a business model to be successful. With some models, a firm's
implementation of CSR goes beyond compliance with regulatory requirements, and engages in
"actions that appear to further some social good, beyond the interests of the firm and that which is
required by law".[5][6] The choices of 'complying' with the law, failing to comply, and 'going beyond' are
three distinct strategic organisational choices. While in many areas such as environmental or labor
regulations, employers may choose to comply with the law, or go beyond the law, other
organisations may choose to flout the law. These organisations are taking on clear legal risks. The
nature of the legal risk, however, changes when attention is paid to soft law.[7] Soft law may incur
legal liability particularly when businesses make misleading claims about their sustainability or other
ethical credentials and practices. Overall, businesses may engage in CSR for strategic or ethical
purposes. From a strategic perspective, the aim is to increase long-term profits and shareholder trust
through positive public relations and high ethical standards to reduce business and legal risk by
taking responsibility for corporate actions. CSR strategies encourage the company to make a
positive impact on the environment and stakeholders including consumers, employees, investors,
communities, and others.[8] From an ethical perspective, some businesses will adopt CSR policies
and practices because of ethical beliefs of senior management. For example, a CEO may believe
that harming the environment is ethically objectionable.

 Maintain Records :
Accounting records are key sources of information and evidence used to prepare, verify
and/or audit the financial statements. They also include documentation to prove asset
ownership for creation of liabilities and proof of monetary and non monetary transactions.

 Insure Assets by Bonding Key Employees :


bonding of employees. Agreement (such as a fidelity bond) under which abonding or
insurance company guarantees payment of a specified sum as damages, in the event one or
more of the employees covered in the bond cause financial loss to the insured (employer).
 Segregate of Duties :
Separation of duties (SoD; also known as Segregation of Duties) is the concept of having more
than one person required to complete a task. In business the separation by sharing of more than one
individual in one single task is an internal control intended to prevent fraud and error. The concept is
alternatively called segregation of duties or, in the political realm, separation of powers.
In democracies, the separation of legislation from administration serves a similar purpose. The
concept is addressed in technical systems and in information technology equivalently and generally
addressed as redundancy.
 Mandatory Employee Rotation :
 Job rotation is a human resources strategy where companies move employeesaround to
various jobs within the organization. Intended to provide benefits to bothemployees and the
employer, job rotation is supposed to increase employeeinterest level and motivation.

 Split Related Party Responsibility :


 In business, a related party transaction is a transaction that takes place between
two parties who hold a pre-existing connection prior to the transaction. An example is how a
dominant shareholder may benefit from making one of their companies trade to the other at
advantageous prices.
 Use Technological Controls :
 Information technology controls. In business and accounting, informationtechnology
controls (or IT controls) are specific activities performed by persons or systems designed to
ensure that business objectives are met. They are a subset of an enterprise's internal control.

Accounting Technique:
Managerial accounting is the process of identifying, analyzing, recording and presenting
financial information so internal management can use it for the planning, decision
making and control of a company.
This is in stark contrast to financial accounting, which is the process of preparing and
presenting quarterly or yearly financial information for external use, such as a
company's audited financial statements for the public.
While financial accounting is used for reporting to the external
investors, shareholders and stakeholders, managerial accounting is information
provided to the company's internal managers and the business's owners so they can
plan and control the business's activities.

Planning and Budgeting


In managerial accounting, weekly and monthly budgets are used to determine what to
sell, how much of it to sell and what price should be charged in order to cover all costs
laid out in the budget and make a margin. The capital budget is a good example of this.

Project Decision Making


The second concept in managerial accounting is project decision making. Managers
use managerial accounting reports such as relevant costing to weigh the costs and
benefits of undertaking a particular project.

Performance Measurement
Performance measurement is used to compare the actual results of operations with
what was budgeted in the planning and budgeting phase. Standard costing is a good
example of this technique.

Definition of Accounting control And Techniques :


Accounting control
1) Accounting control is the methods and procedures that are implemented by a firm to help ensure the
validity and accuracy of its financial statements. The accounting controls do not ensure compliance with
laws and regulations, but rather are designed to help a company comply.
2) Accounting control is the manner in which processes are configured to manage risk within an
organization. The targets of internal control are to: 1)Guard against the loss of assets 2)Ensure
that financial statements represent fairly the financial results, position, and cash flows of a
business 3)Ensure that objectives are met in an effective and efficient manner 4)Ensure that
laws and regulations are followed
The system of accounting control may contain dozens or hundreds of separate control activities
that are intended to work within the specific characteristics of a business. Thus, the accounting
controls for a manufacturer are different from those of a distributor and retailer, even though all
three firms may operate within the same industry.
Accounting Techniques
Accounting methods refer to the basic rules and guidelines under which businesses keep their
financial records and prepare their financial reports. There are two main accounting methods
used for record-keeping: the cash basis and the accrual basis. Small business owners must decide
which method to use depending on the legal form of the business, its sales volume, whether it
extends credit to customers, whether it maintains an inventory, and the tax requirements set forth
by the Internal Revenue Service (IRS). Some form of record-keeping is required by law and for
tax purposes, but the resulting information can also be useful to managers in assessing the
company's financial situation and making decisions. It is possible to change accounting methods
later, but the process can be complicated. Therefore it is important for small business owners to
decide which method to use up front based on what will be most suitable for their particular
business.

CASH BASIS
Accounting records prepared using the cash basis recognize income and expenses according to
real-time cash flow. Income is recorded upon receipt of funds, rather than based upon when it is
actually earned; expenses are recorded as they are paid, rather than as they are actually incurred.
Under this accounting method, therefore, it is possible to defer taxable income by delaying
billing so that payment is not received in the current year. Likewise, it is possible to accelerate
expenses by paying them as soon as the bills are received, in advance of the due date.

ACCRUAL BASIS
A company using an accrual basis for accounting recognizes both income and expenses at the
time they are earned or incurred, regardless of when cash associated with those transactions
changes hands. Under this system, revenue is recorded when it is earned rather than when
payment is received; expenses are recorded when they are incurred rather than when payment is
made.

CASH VS. ACCRUAL BASIS


As we've seen, the key difference between the two methods of accounting has to do with how
each method records cash coming into and going out of the company. At any one point in time, a
company's accounts will look very different depending on which accounting method was used to
prepare those accounts. Over time, these differences diminish since all expenses and revenues
are eventually recorded.
If a company called, say, Cash Method Company, pays its annual rent of $12,000 in January,
rather than paying $1,000 per month all year, it will show a rent expense of $12,000 in January
and no rent expense for the rest of the year. If another organization, Accrual Method Company,
made the same rental payment in January, its records would show a $1,000 rent expense in
January as well as in each month of the year. At the end of the year, the expense records of the
two companies will look very similar. At any point earlier in the year, however, the two
company records will look very different.
The cash method offers several advantages: it is simpler than the accrual method; it provides a
more accurate picture of cash flow; and income is not subject to taxation until the money is
actually received. A disadvantage of the cash method is that expenses and revenues are not
matched in time. For example, if a company provides landscaping services to a client in early
April, it will likely send that client an invoice in May and may not receive payment for the
services provided until June. Meanwhile, employees will be paid for the time they spent on the
project in April and May. Accordingly, the accounting records will show high expenses in April
and May with no corresponding income.
In contrast, the accrual method is designed to recognize income and expenses in the period to
which they apply, regardless of whether or not money has changed hands. Under the accrual
basis of accounting, the income associated with the landscaping services described above would
be recorded in April, the month in which the services were provided, even though the payment
for those services may not arrive until June. Consequently, the company using an accrual method
of accounting will have records that show expenses and revenues for the landscaping job in the
same month. The main advantage of the accrual method is that it provides a more accurate
picture of how a business is performing over the long-term than the cash method. The main
disadvantages are that it is more complex than the cash basis and that income taxes may be owed
on revenue before payment is actually received.
Under generally accepted accounting principles (GAAP), the accrual basis of accounting is
required for all businesses that handle inventory, from small retailers to large manufacturers. It is
also required for corporations and partnerships that have gross sales over $5 million per year,
although there are exceptions for farming businesses and qualified personal service corporations-
-such as doctors, lawyers, accountants, and consultants. A business that chooses to use the
accrual basis must use it consistently for all financial reporting and for credit purposes. For
anyone who runs two or more businesses, however, it is permissible to use different accounting
methods for each.

CHANGING ACCOUNTING METHODS


In some cases, businesses find it desirable to change from one accounting method to another.
Changing accounting methods requires formal approval of the IRS, but new guidelines adopted
in 1997 make the procedure much easier for businesses. A company wanting to make a change
must file Form 3115 in duplicate and pay a fee. A copy should be attached to the taxpayer's
income tax return and the other copy must be sent to the IRS.
Any company that is not currently under examination by the IRS is permitted to file for approval
to make a change. Applications can be made at any time during the tax year, but the IRS
recommends filing as early as possible. Taxpayers are granted automatic six-month extensions
provided they file income taxes on time for the year in which the change is requested. The
amended tax returns using the new accounting method must also be filed within the six-month
extension period. In considering whether to approve a request for a change in accounting
methods, the IRS looks at whether the new method will accurately reflect income and whether it
will create or shift profits and losses between businesses.
Changes in accounting methods generally result in adjustments to taxable income, either positive
or negative. For example, say a business wants to change from the cash basis to the accrual basis.
It has accounts receivable (income earned but not yet received, so not recognized under the cash
basis) of $15,000, and accounts payable (expenses incurred but not paid, so not recognized under
the cash basis) of $20,000. Thus the change in accounting method would require a negative
adjustment to income of $5,000. It is important to note that changing accounting methods does
not permanently change the business's long-term taxable income, but only changes the way that
income is recognized over time.
If the total amount of the change is less than $25,000, the business can elect to make the entire
adjustment during the year of change. Otherwise, the IRS permits the adjustment to be spread out
over four tax years. Obviously, most businesses would find it preferable for tax purposes to make
a negative adjustment in the current year and spread a positive adjustment over subsequent years.
If the accounting change is required by the IRS because the method originally chosen did not
clearly reflect income, however, the business must make the resulting adjustment during the
current tax year. This provides businesses with an incentive to change accounting methods on
their own if they realize that there is a problem.

Objective