Accounting Practice in Real Estate a Perspective in Vision Living Limited

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Accounting Practice in Real Estate a Perspective in Vision Living Limited

Chapter -1 Introduction

1.1 Introductory thoughts:

The real estate sector is one of the fastest growing and thrusting sectors in Bangladesh. Infrastructural development is highly important for a country to rise as a develop nation and to ensure housing facilities for the citizen of the country. But compared to that there have been a few studies which are far below the required number on the real estate sector and its accessibility to financing. Consequently, this sector requires an extensive study to find out the future potentiality, problems and solutions of the real estate sector and the availability of financing in this respect. This study may work as the basis of knowing the present scenario and for any future study.

1.2 Objectives of the Study:

The broad objective of the study is to identify the pattern, problems and potentials of Real estate sector of Bangladesh. The specific objectives of the study are summarized below:

· To assess the role and contribution of apartment business to meet the housing

· Needs in the Metropolitan city areas.

· To identify the demand pattern of apartment buildings in metropolitan areas

· To identify the pricing situation of the sector in the light of soaring construction

materials price.

· To identify the pricing situation of the sector in the light of soaring construction

materials price.

· To identify the sources of funds of apartment business.

· To identify the factors motivating the buyers to buy apartment.

· To identify the sources of funds of the buyers for buying flats

· To identify the factors motivating the buyers to buy apartment.

· To identify the sources of funds of the buyers for buying flats

· To identify the socio-economic characteristics of apartment buyers.

In short, the objective of the study is to find out the current condition, growth, market structure, financing condition and future prospects of the real estate sector in Bangladesh containing comparative scenario analysis with the global real estate market.

1.3 Scopes and Coverage of the Study:

In our country real estate is a growing and profitable sector in business arena. There are many dimensions of study of this industry. But the main focus of the study is to identify the problem and prospects of this sector in Bangladesh from the view point of developers (Real Estate Companies), apartment buyers (Consumers or ultimate beneficiaries) and the financial institution providing housing loans. So, the study tries to explore the problem and prospects of apartment business. The apartment companies are mostly concentrated in Dhaka City and to some extent in Chittagong city. But Dhaka city is the main center of apartment development, so the study is confined to apartment projects within the Dhaka City and suburb of Dhaka City.

1.4 Methodologies:

An explorative research has been conducted in preparing this paper. Pure basic research approach has been used. Theoretical and practical studies have also been incorporated. Multiple methods were used to collect data for identifying the pattern of apartment projects of Bangladesh and their problems: Review of relevant literature, survey, in-depth interviewing, informal interviews, and observation methods were some of them. Respondents of the study consist of apartment buyers and executives of the apartment companies, executives of the housing finance institutions.

Collection of Data: Data have been collected through face-to-face and telephone interview. Questionnaire has been used in gathering primary information from real estate participants. Information has been used from different secondary sources – Internet, Newspapers, annual reports, online and printed articles, journals and previous research papers on real estate sector and editorials & special housing supplement of news papers etc. Opinions have been collected from experts and participants in the real estate sector, which have been very useful in analyzing the data & information and to reach a conclusion.

The raw data also collected from Real Estate & Housing Association of Bangladesh (REHAB), Real Estate Yellow Pages (A Residential & Commercial Real Estate Directory), Annual Report of REHAB 2008, Ministry of Housing & Public Works, Rajdhani Unnoyon Kortipokkho (RAJUK), Imarot Nirmaan Bidhimala 2008, Daily Ittefaq (Weekly Report on Real Estate, Monday on every week), Weekly Bangladesh Shaptahik, Bangladesh Real Estate Law 2008

Graphical Presentation: The data were presented in Bart Chart (Fig-1), Line graph Fig. 1. This graph also described in statistically and possible cause and result.

Fig: 1 Yearly Number of flat hand over by the real estate company
Year Growth of Real Estate Business

Observation & guideline preparation

Area Specialization of Real Estate sector Classification of Real Estate Product

At the beginning, Sale of Real estate companies is low. Might be then, buyers were unaware of Real estate product

1 The flat sale of 2000-2007 show a positive skew ness curve where the highest number

(Mode) of flat sale Tk. 40-55 lac. The flat sale of apartment deviate Tk. 21.61 lack

With the mean value of Tk. 53.61 lac

2 In establishment year 2000-2002, flat sold 28 % and in 2003-2004, it was 72%.

3 Flat was sold in Dhaka (55%), Chittogong 25%, Sylhet 5%, others 15% flat was sold.

4 Banani Gulshan and Dhanmondi, Kulshi (Chittogong) are treated as most exclusive area.

5 The land Owners of Banani, Gulshan, Dhanmondi and Kulshi (Chittogong) zone are very much aware for developing their land

6 Buyers are feeling comfort to buy flats in Banani,Gulshan, Dhanmondi, & Kulshi (Chittogong) zones. Uttara is now becoming prime zone.

7 At the very beginning 15-25 lac prices flat were sold more but in the year 2004 number of flat sale of this range gone down.

8 40-55 lac prices flats became very much popular and buyers felt comfort to buy it. 55-70 lac prices flats are next popular to buyers.

· Tools Used: In analyzing the data and information gathered, a few Microsoft Excel tools were used such as mathematical functions, trend analysis etc. Moreover when forecasting future scenario based on current situation, gathered data and information have been assumed to have linear relationship and thus linear forecasting of different facts has been incorporated.

· Interpretation & Substantiation: Numerical data have been analyzed and interpreted with concentration and relation to the main issue. Data and information collected from different sources were compared critically and found negligible mismatching. Theoretical analysis along with numerical evidence has been used to substantiate the findings of the report.

1.5 Limitation of the study:

· Inadequacy of data: Till now, the sector is developing in a scattered way. For this

reason it is very difficult to obtain data about participants of this sector. As very

competitive and private sector enterprises, they maintain strict secrecy about their

finance related information. Information regarding finance of the industries can not be

gathered as desired. Recent data and information was not available in many cases

where it was necessary. Linear relationship has been assumed in analyzing the

information, which may not apply in many cases.

  • Primary data prone to inaccuracy: had significant dependence on the primary sources, so there might be some level of inaccuracy with those collected information. Though, adequate verification and cross-checking was used to minimize the error level.
  • Interpretation problem: Many of the analyses on the obtained data are based upon my sole interpretation. As a result it might bring in some biases, as lack of knowledge and depth of understanding might hinder me to produce an absolute authentic and meaningful report.
  • Literature constraint: No major work has so far been done in this sector. So there is a dearth of literature in this field.

Chapter-2 Company’s General Information


Name of the company: VISION LIVING LIMITED.

Established and Incorporated as a private company in 25th February, 2007.

2.2 Company Logo:

2.3 Over view of Vision Living Limited:

Vision Living Ltd. is 100% Bangladeshi Developer and Real Estate rising company in Bangladesh. The company started its activities in 2006 named Vision Living Ltd which registered with Joint Stock Companyby the company’s act 1994. The company started its work with only one project. Now it has more than 20 projects.

The company wants to establish itself not only for earning money but the company wants to build up the nations by creating working capacity. The organization had a wonderful vision about the nation.

2.4 Corporate Structure:

The overall Management of the company will be with the Board of Directors (BOD). It will run according to the provision of the articles of association and the Memorandum of association of the company. Mr. A.Q.M. Rashidul Ahsan and Delwar Hossain have been appointed as the Chairman and Managing Director of the company respectively.

Execuitve Commitee Members of Vision Living Ltd. (2009-2010)

The following Directors the EC Members of Vision Living Ltd. as on 2009-2010 sessions:

Sl Name Designation
1 A.Q.M.Rashidul Ahsan Chairman
2 Delwar Hossain Managing Director
3 Farid Hossain Director Finance
4 Md. Abdul Latif Director Engineering
5 Shahidur Rahman Chowdhury Director
6 Md. Nesar Uddin Director
7 A.G.M. Shahidul Islam Director
8 Shabbir Ahmed Osmani Director
9 Md. Mahabubur Rahman Director
10 ANM Anwar Hossain Director
11 Mostafa Amin Khan Director
12 Oliur Rahman Sheraji Director

Management & finance Commitee of Vision Living Ltd(2009-2010)

The following Directors are the Management & Finance Committee Members of Vision Living Limited on 2009-2010 sessions:

Sl Name Designation
1 A.Q.M.Rashidul Ahsan Chairman
2 Delwar Hossain Managing Director
3 Farid Hossain Director Finance
4 Md. Abdul Latif Director Engineering
5 Shahidur Rahman Chowdhury Director
6 Md. Nesar Uddin Director
7 A.G.M. Shahidul Islam Director
8 Shabbir Ahmed Osmani Director

Units of Vision Living Limited

The following Units are Vision Living Limited :

1) Construction Unit and

2) Land Unit

Supporting Professional Services

In addition to the management Vision Living Ltd. has identified the following as persons who will contribute greatly to the success of the company.

1. Lawyer: To look after the legal side of the company the Management establish an advisory Law Board for the company Board consists of the following Law Board :

1) G.M. Monir Ahmed FCA

2) Moni Mala(Tax consultant)

3) Eng. Md. Selim(Consultant Engineering)

4) Adv. Abdullah Mohammed Zubair

2. Consultant: The following consultants of our Company, they assist our projects such as architectural, electrical and structural drawing, design, and layout plan:

1) Archden

2) Aline

3) ESI

4) Arc Lab

5) Farvent

6) Volume Zero

2. Auditor: Ata Khan & Co. (Chartered Accountant) for the year of 2009-2010.

4. Banker: Vision Living is service and Finance oriented for financial support and investment it is fully supported by the following Bank:

1) Islami Bank Bangladesh Ltd.

2) Standard Chartered Bank Ltd.

3) Prime Bank Ltd.

Staffing Plan

Dept. Name Number of Employee

Admin 60

Accounts 12

Marketing 20

Developers 125

Bank Correspondent

As renounced companies, Vision Living Ltd. operates 3 accounts in different Banks. There is a close relation between the Bank and the comOver view of Vision Living Limitedpany. Vision Living Ltd. received investment facilities from different Banks and refunded the investment in due time.

2.5 Nature of Business:

As renounced companies, Vision Living Ltd. has different Apartment and Land business. Activities of Vision Living Ltd are described bellow.

Apartment Unit:

Most of our apartment projects are located in the prestigious places. One of the best residential area of the elites, having the important places, best educational institutions, shopping centers and bank of Dhaka city, as the area has clean climate and well planned model town and fast communication network, multi directional roads & highways, international airport, railway station and river port facilities.

Land Unit:

Vision Living Ltd. has Land project at Vhuighar, Narayangonj name “Vision South Valley’’. There are about 2000 plot for incumbent. This project considering the incumbent necessities of exclusive and luxurious living, where reputed schools, colleges, universities and aristocratic hospitals and shopping malls with wonderful communication system are rudimental requirements.

Vision Living Ltd. (VLL) is best because:

1. Vision ensures best quality, attractive architecture and quality construction.

2. Reliability & Responsibility.

3. Well planned, organized, environment friendly and space effective yet airily, internal lay out etc.

4. Working experienced and highly qualified construction Management team.

The company Vision Living Ltd. is constructing multi storied building and selling it as a flat. Projects of Vision Living Ltd. are as follows:

Ongoing Projects of Vision Living Limited:

Vision Cassandra at Uttara

Vision Casselia at Uttara

Vision Cressida at Uttara

Vision D’Wealth at Uttara

Vision Absolon at Uttara

Vision Meherab Garden at Dhaka Cantonment

Vision Deacon at Bashundhara R/A

Vision Decidela at Bashundhara R/A

Outgoing Projects Vision Living Limited:

Vision Organza at Uttara

Vision Cressida at Uttara

Upcoming Projects Vision Living Limited:

Vision Montrose at Bashundhara R/A

Vision Meherab Garden at Dhaka Cantonment

2.6 Vision:

To earn the distinction from our clients as satisfying their commercial real estate needs better than anyone else.

2.7 Mission:

Is” Quality-the unit we count” And by quality we never mean only product quality, it extends to our all business activities as well.

2.8 Our Strength:

Is the support that we have gained from their people, their customers and their other stakeholder around us.

2.9 Objective of the Company:

Our objectives are to conduct transparent business operations within the legal & social frame work with aims to attain the mission reflected by our vision.

2.9.1 Long-range objective:

The long-term objective is to gain leadership globally in the home appliance industry.

2.9.2 Short term objective:

Their short-range objective is profit maximization by providing quality product.

2.9.3 Strategic Intent:

To be the global leader in this sector. Corporate Strategy:

To earn more profit by applying marketing policy. Operational Strategy:

To promote corporate image establish good production facilities and to setup a good marketing channel.

Corporate Head Office:

Plot # 15 (Fifth Floor), Dhaka Mymensing Road,

Sector#03, Uttara Model Town, Dhaka-1230, Bangladesh.

Tel: (880-2) 8922263, 8911252, Fax: 880-2-8834695


2.10 Organizational Structure of the Company:


Chapter-3 Literature Review of Accounting

3.1 Origin of Accounting

3.1.1 Token accounting in ancient Mesopotamia

Map of the Middle East showing the Fertile Cresent circa. 3rd millennium BC

The earliest accounting records were found amongst the ruins of ancient Babylon, Assyria and Sumeria, which date back more than 7,000 years. The people of that time relied on primitive accounting methods to record the growth of crops and herds. Because there is a natural season to farming and herding, it is easy to count and determine if a surplus had been gained after the crops had been harvested or the young animals weaned.

Accounting tokens made of clay, from Susa, Uruk period, cira 3500 BCE. Department of Oriental Antiquities, Louvre.

During the period 80003700 BCE, the Fertile Crescent witnessed the spread of small settlements supported by agricultural surplus. Tokens, shaped into simple geometric forms such as cones or spheres, were used for stewardship purposes in relation to identifying and securing this surplus, and are examples of accounts that referred to lists of personal property. Some of them bore markings in the form of incised lines and impressed dots. Neolithic community leaders collected the surplus at regular intervals in the form of a share of the farmers’ flocks and harvests. In turn, the accumulated communal goods were redistributed to those who could not support themselves, but the greatest part was earmarked for the performance of religious rituals and festivals. In 7000 BCE, there were only some 10 token shapes because the system exclusively recorded agricultural goods, each representing one of the farm products levied at the time, such as grain, oil and animals. The number of token shapes increased to about 350 around 3500 BCE, when urban workshops started contributing to the redistribution economy. Some of the new tokens stood for raw materials such as wool and metal and others for finished products among which textiles, garments, jewelry, bread, beer and honey.

The invention of a form of bookkeeping using clay tokens represented a huge cognitive leap for mankind. The cognitive significance of the token system was to foster the manipulation of data. Compared to oral information passed on from one individual to the other, tokens were extra-somatic, that is outside the human mind. As a result, the Neolithic accountants were no longer the passive recipients of someone else’s knowledge, but they took an active part in encoding and decoding data. The token system substituted miniature counters for the real goods, which eliminated their bulk and weight and allowed dealing with them in abstraction by patterning, the presentation of data in particular configurations. As a result, heavy baskets of grains and animals difficult to control could be easily counted and recounted. The accountants could add, subtract, multiply and divide by manually moving and removing counters.

Globular token envelope with a cluster of accounting tokens. Clay, Susa, Uruk period (4000 to 3100 BCE). Department of Oriental Antiquities, Louvre.

Economic tablet with numeric signs. Proto-Elamite script in clay, Susa, Uruk period (3200 BC to 2700 BCE). Department of Oriental Antiquities, Louvre.

The Mesopotamian civilization emerged during the period 37002900 BCE amid the development of technological innovations such as the plough, sailing boats and copper metal working. Clay tablets with pictographic characters appeared in this period to record commercial transactions performed by the temples. Clay receptacles known as bullae (Latin: ‘Bubble’), were used in Elamite city of Susa which contained tokens. These receptacles were spherical in shape and acted as envelopes, on which the seal of the individuals taking part in a transaction were engraved. The symbols of the tokens they contained were represented graphically on their surface, and the recipient of the goods could check whether they matched with the amount and characteristics expressed on the bulla once they had received and inspected them. The fact that the content of bulla was marked on its surface produced a simple way of checking without destroying the receptacle, which constituted in itself an exercise in writing that, despite being born spontaneously as a support for the existing system for controlling merchant goods, ultimately became the definitive practice for non-oral communication. Eventually, bullae were replaced by clay tablets, which used symbols to represent the tokens.

During the Sumerian period, token envelop accounting was replaced by flat clay tablets impressed by tokens that merely transferred symbols. Such documents were kept by scribes, who were carefully trained to acquire the necessary literary and arithmetic skills and were held responsible for documenting financial transactions. Such records preceded the earliest found examples of cuneiform writing in the form of abstract signs incised in clay tablets, which were written in Sumerian by 2900 BCE in Jemdet Nasr. Therefore “token envelop accounting” not only preceded the written word but constituted the major impetus in the creation of writing and abstract counting.

3.1.2 Accounting in the Roman Empire

Part of the Res Gestae Divi Augusti from the Monumentum Ancyranum (Temple of Augustus and Rome) at Ancyra, built between 25 BCE – 20 BCE.

The Res Gestae Divi Augusti (Latin: “The Deeds of the Divine Augustus”) is a remarkable account to the Roman people of the Emperor Augustus‘ stewardship. It listed and quantified his public expenditure, which encompassed distributions to the people, grants of land or money to army veterans, subsidies to the aerarium (treasury), building of temples, religious offerings, and expenditures on theatrical shows and gladiatorial games. It was not an account of state revenue and expenditure, but was designed to demonstrate Augustus’ munificence. The significance of the Res Gestae Divi Augusti from an accounting perspective lies in the fact that it illustrates that the executive authority had access to detailed financial information, covering a period of some forty years, which was still retrievable after the event. The scope of the accounting information at the emperor’s disposal suggests that its purpose encompassed planning and decision-making.

The Roman historians Suetonius and Cassius Dio record that in 23 BC, Augustus prepared a rationarium (account) which listed public revenues, the amounts of cash in the aerarium (treasury), in the provincial fisci (tax officials), and in the hands of the publicani (public contractors); and that it included the names of the freedmen and slaves from whom a detailed account could be obtained. The closeness of this information to the executive authority of the emperor is attested by Tacitus‘ statement that it was written out by Augustus himself.

Roman writing tablet from the Vindolanda Roman fort of Hadrian’s Wall, in Northumberland (1st-2nd century AD) requesting money to buy 5,000 measures of cereal used for brewing beer. Department of Prehistory and Europe, British Museum.

Records of cash, commodities, and transactions were kept scrupulously by military personnel of the Roman army. An account of small cash sums received over a few days at the fort of Vindolanda cira 110 CE shows that the fort could compute revenues in cash on a daily basis, perhaps from sales of surplus supplies or goods manufactured in the camp, items dispensed to slaves such as cervesa (beer) and clavi caligares (nails for boots), as well as commodities bought by individual soldiers. The basic needs of the fort were met by a mixture of direct production, purchase and requisition; in one letter, a request for money to buy 5,000 modii (measures) of braces (a cereal used in brewing) shows that the fort bought provisions for a considerable number of people.

The Heroninos Archive is name given to a huge collection of papyrus documents, mostly letters, but also including a fair number of accounts, which comes from Roman Egypt in 3rd century CE. The bulk of the documents relate to the running of a large, private estateis named after Heroninos because he was phrontistes (Koine Greek: manager) of the estate which had a complex and standarised system of accounting which was followed by all its local farm managers.Each administrator on each sub-division of the estate drew up his own little accounts, for day to day running of the estate, payment of the workforce, production of crops, the sale produce, the use of animals, and general expetidirure on the staff. This information was then summarized as pieces of papyrus scroll into one big yearly account for each particular sub—division of the estate. Entries were arranged by sector, with cash expenses and gains extrapolated from all the different sectors. Accounts of this kind gave the owner the opportunity to take better economic decisions because the information was purposefully selected and arranged.

Simple accounting is mentioned in the Christian Bible (New Testament) in the Book of Matthew, in the Parable of the Talents.

3.1.3 Islamic accounting & algebra

In the Holy Qur’an, the word hesab (Arabic: account) is used in its generic sense, relating to one’s obligation to account to God on all matters pertaining to human endeavour. According to the Holy Qur’an, followers are required to keep records of their indebtedness (Sura 2, ayah 282), thus Islam thus provides general approval and guidelines for the recording and reporting of transactions.

The Islamic law of inheritance (Sura 4, ayah 11) defines exactly how the estate is calculated after death of an individual. The power of testamentary disposition is basically limited to one-third of the net estate (i.e. the assets remaining after the payment of funeral expenses and debts), providing for every member of the family by allotting fixed shares not only to wives and children, but also to father and mothers.The complexity of this law served as an impetus behind the development of algebra (Arabic: al-jabr) by Muhammad ibn M?s? al-Khw?rizm? and other medieval Islamic mathematicians. Al-Khw?rizm?’s Hisab al-jabr w’al-muqabala (Arabic: “The Compendious Book on Calculation by Completion and Balancing”, Baghdad, c. 825) devoted a chapter on the solution to the Islamic law of inheritance using linear equations.In the twelfth century, Latin translations of al-Khw?rizm?’s Kit?b al-Jam? wa-l-tafr?q bi-?is?b al-Hind (Arabic: Book of Addition and Subtraction According to the Hindu Calculation) on the use of Indian numerals, introduced the decimal positional number system to the Western world.

The development of mathematics and accounting was intertwined during the Renaissance. Mathematics was in the midst of a period of significant development in the late 15th century. Hindu-Arabic numerals and algebra were introduced to Europe from Arab mathematics at the end of the 10th century by the Benedictine monk Gerbert of Aurillac, but it was only after Leonardo Pisano (also known as Fibonacci) put commercial arithmetic, Hindu-Arabic numerals, and the rules of algebra together in his Liber Abaci in 1202 that Hindu-Arabic numerals became widely used in Italy.

While there is no direct relationship between algebra and bookkeeping, the teaching of the subjects and the books published addressed the same group, namely the children of merchants who were sent to reckoning schools (in Flanders and Germany) or abacus schools (known as abbaco in Italy), where they learned the skills useful for trade and commerce. There is probably no need for algebra in performing bookkeeping operations, but for complex bartering operations or the calculation of compound interest, a basic knowledge of arithmetic was mandatory and knowledge of algebra was very useful.

3.1.4 Luca Pacioli and double-entry bookkeeping

Main articles: Luca Pacioli and Double-entry bookkeeping system

Bartering was the dominant practice for traveling merchants during the Middle Ages. When medieval Europe moved to a monetary economy in the 13th century, sedentary merchants depended on bookkeeping to oversee multiple simultaneous transactions financed by bank loans. One important breakthrough took place around that time: the introduction of double-entry bookkeeping,which is defined as any bookkeeping system in which there was a debit and credit entry for each transaction, or for which the majority of transactions were intended to be of this form.The historical origin of the use of the words ‘debit’ and ‘credit’ in accounting goes back to the days of single-entry bookkeeping in which the chief objective was to keep track of amounts owed by customers (debtors) and amounts owed to creditors. ‘Debit,’ is Latin for ‘he owes’ and ‘credit’ Latin for ‘he trusts’.

The earliest extant evidence of full double-entry bookkeeping is the Farolfi ledger of 1299-1300. Giovanno Farolfi & Company were a firm of Florentine merchants whose head office was in Nîmes who also acted as moneylenders to Archbishop of Arles, their most important customer.The oldest discovered record of a complete double-entry system is the Messari (Italian: Treasurer‘s) accounts of the city of Genoa in 1340. The Messari accounts contain debits and credits journalised in a bilateral form, and contains balances carried forward from the preceding year, and therefore enjoy general recognition as a double-entry system.

Pacioli’s portrait, a painting by Jacopo de’ Barbari, 1495, (Museo di Capodimonte).The open book to which he is pointing may be his Summa de Arithmetica, Geometria, Proportioni et Proportionalità.

Luca Pacioli‘s “Summa de Arithmetica, Geometria, Proportioni et Proportionalità” (Italian: “Review of Arithmetic, Geometry, Ratio and Proportion“) was first printed and published in Venice in 1494. It included a 27-page treatise on bookkeeping, “Particularis de Computis et Scripturis” (Italian: “Details of Calculation and Recording”). It was written primarily for, and sold mainly to, merchants who used the book as a reference text, as a source of pleasure from the mathematical puzzles it contained, and to aid the education of their sons. It represents the first known printed treatise on bookkeeping; and it is widely believed to be the forerunner of modern bookkeeping practice. In Summa Arithmetica, Pacioli introduced symbols for plus and minus for the first time in a printed book, symbols that became standard notation in Italian Renaissance mathematics. Summa Arithmetica was also the first known book printed in Italy to contain algebra.

Although Luca Pacioli did not invent double-entry bookkeeping,]his 27-page treatise on bookkeeping contained the first known published work on that topic, and is said to have laid the foundation for double-entry bookkeeping as it is practiced today.Even though Pacioli’s treatise exhibits almost no originality, it is generally considered as an important work, mainly because of its wide circulation, it was written in vernacular Italian language, and it was a printed book.

According to Pacioli, accounting is an ad hoc ordering system devised by the merchant. Its regular use provides the merchant with continued information about his business, and allows him to evaluate how things are going and to act accordingly. Pacioli recommends the Venetian method of double-entry bookkeeping above all others. Three major books of account are at the direct basis of this system: the memoriale (Italian: memorandum), the giornale (journal), and the quaderno (ledger). The ledger is considered as the central one and is accompanied by an alphabetical index.

Pacioli’s treatise gave instructions in how to record barter transactions and transactions in a variety of currencies – both being far more commonplace than they are today. It also enabled merchants to audit their own books and to ensure that the entries in the accounting records made by their bookkeepers complied with the method he described. Without such a system, all merchants who did not maintain their own records were at greater risk of theft by their employees and agents: it is not by accident that the first and last items described in his treatise concern maintenance of an accurate inventory.

The nature of double-entry can be grasped by recognizing that this system of bookkeeping did not simply record the things merchants traded so that they could keep track of assets or calculate profits and losses; instead as a system of writing, double-entry produced effects that exceeded transcription and calculation. One of its social effects was to proclaim the honesty of merchants as a group; one of its epistemological effects was to make its formal precision based on a rule bound system of arithmetic seem to guarantee the accuracy of the details it recorded. Even though the information recorded in the books of account was not necessarily accurate, the combination of the double entry system’s precision and the normalizing effect that precision tended to create the impression that books of account were not only precise, but accurate as well. Instead of gaining prestige from numbers, double entry bookkeeping helped confer cultural authority on numbers.

3.2 Modern Accounting Information System

3.2.1 Introduction:

Being an accounting professional today requires far more than just a textbook understanding of debits and credits. Journalizing and posting steps and the latest accounting and auditing pronouncements. The accounting professional of 21st century must also stay abreast of the many technological advances, which continually reshape the business world. These advances have sparked an information revolution, which in the past few decades has transformed almost every aspect of accounting. Perhaps the greatest impact of the information evolution has bee on the accounting system itself indeed, accounting systems and the world of computers and data processing has become inseparable. Recognition of this has given rise to a new accounting specialty area known as accounting information system (AIS).

The AIS area encompasses many potential topics such as general system theory control structure and specific computer applications. Developments in AIS area have substantially affected accounting practice and consequently accounting education.

The modern business world is dramatically changing their accounting systems. They update their systems with the computerized systems. In computerized systems they have to keep accounting and non-accounting transaction for providing required information to the users of the organization. But Accounting Information Systems (AIS) is more complex and integrated each other which are as follows:

3.2.2 Accounting:

Accounting is an information system that identifies records and communicates the economic events of an organization to interested users. That is, it employees various systemic operations to generate relevant information. Among the operations that it encompasses are:

1. Recording economic data (Data Collection)

2. Maintaining stored data (Data maintenance) and

3. Presenting quantitative information in financial terms.

3.2.3 Information:

In the broadest sense, information is intelligence that is meaningful and useful to persons for whom it is intended. It is necessary for making sound decisions and inducing desired actions. Usually, information is derives from the processing of data.

Data are the raw facts and figures and even symbols that together from the inputs to an information system. Generally information reduces the uncertainty of future events.

3.2.4 System:

A system is a unified group of interacting that function together to achieve its purposes. Each system has a boundary that separates it form its environment. Most systems are open, in that they accept inputs from their environments and provide outputs to the environments. In particular, I will be concerned with the fact that a system contains interdependent parts that have system characteristics and are called subsystems.


Basic Characteristic of a tangible open system.

3.3 Accounting Information systems (AIS):

An accounting information system is a unified structure within an entity, such as a business firm, that employs physical resources and other components to transform economic data into accounting information, which purpose of satisfying the information needs of a variety of users.

Information system is defined as the function that – performs the design, Construction, and maintenance of human/ machine systems that-

· Utilize information-processing technology (Computers, Telecommunications and office automation.)

· To support the information processing needs and information access requirements.


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