November 10 is celebrated as the ‘International Accounting Day’ which is also frequently referred to as International Accountants Day. The objective of observance of a day in the year for a particular subject is to highlight the importance of that subject. Accordingly, ‘Accounting Day’ is observed to highlight the importance of accounting.
‘Accounts’ is a common word. Where there is a monetary transaction, there is a scope of accounts. Every one usually maintains some accounts for their personal purpose. Based on nature of transaction, based on nature of organization and based on ownership of the organization the nature of accounting is different. Objective of the accounts, which is internationally known as financial statements, is different based on the nature and ownership of the organization. As for example the nature and objectives of financial statements of Government Organizations are different as those of the Non-Government Organizations (NGOs).
Likewise, nature and objectives of financial statements of NGOs are different than those of the commercial and business organizations. In case of commercial, business and financial organizations or of the organizations which perform the fiduciary activities, the importance of accounts/financial statements is much higher. Without proper financial statements, the stakeholders of the entity would not be able to analyse their financial health or whether their operation is earning profit or incurring loss.
It is pertinent to mention that the financial statements are not mere collation of some amount rather it is a pictorial representation of the operational position of the entity. Despite having so much importance of the financial statements a large number of entrepreneurs of our country hold a view that maintaining accounts is an easy matter and do not give the matter its due importance. Actually accounts are not so easy a matter.
It is very important for ensuring accountability for the country like
Bangladesh. The basic elements of IFRS are recognition, measurement,
presentation and disclosure. For each and every transaction, all the
elements as mentioned above need to be analyzed and effect
should be given in the financial statements.
There are some procedures, basis and principles of accounting, selection and implementation. Only someone with accounting background can comprehend these. For example, there are two types of accounting – one, Single Entry System which is applicable only in a very small enterprise where the owner himself performs every operational activity of the entity and the other is Double Entry System which is the actual accounting system for all types of commercial organizations.
There are also two bases of Double Entry System of accounting - one is cash basis in which only cash transactions are considered and the other is accrual basis where all other transactions, which are due to the case, have taken place but cash transaction has not yet been performed. Apart from this, in the era of globalization there is no other alternative except compliance of International Financial Reporting Standard (IFRS). One of the essence of IFRS is it help to reduce the gap between the people who provide capital and those who receive it.
It is very important for ensuring accountability for the country like Bangladesh. The basic elements of IFRS are recognition, measurement, presentation and disclosure. For each and every transaction, all the elements as mentioned above need to be analyzed and effect should be given in the financial statements. Considering all the issues of accounting inside, no doubt, it can be mentioned that proper accounting of a commercial entity is not so easy a task. For preparing a financial statement complying the IFRS, involvement of a professional accountant is essential. But in most of the cases, our entrepreneurs are not ready to spend such an amount which is required to generate a financial statement complying IFRS.
According to our local law and international best practices, the financial statements of a commercial entity are required to be audited by the firm of Chartered Accountants. The main objective of such audit is to obtain a confirmation that the financial statement prepared by the management of the entity is ‘true and fair’ and free from material misstatements. Likewise, it may be mentioned that the efforts and time which is required to verify the financial statements with a view to expressing an opinion about ‘true & fair’ and free from material misstatement are not properly evaluated. Finally, another important issue, which is worthwhile to mention, is that there is a lack of participation of the mass people in review, observation and making comments on published financial statements. Everybody knows that the quality of a product and services as well as improvement of the quality of any product and services depend on the comments and feedback from the users. There remains a serious lack of such feedback and comments.
In our country there are laws and regulations to publish annual financial statements of all the listed companies in the form of hard copies as well as soft copies at website. All the banks and financial institutions are required to publish their annual financial statements in at least two daily newspapers. How far the objectives of such publication of annual reports in the financial statements in daily newspaper are achieved - there remains a question.
It cannot be denied that there are serious lacks of accounting systems in each and every sector of our country. We will also keep in mind that the published accounts/financial statements are one of the main tools to make the responsible person accountable or answerable in regard to the operational activities of the entity.
As regards to the economic activities, a substantial part is performed by the Government and by the state-owned entities, banks and financial institutions. Not only the investors and potential investors but also we, the people and depositors, are the main stakeholders of the government and state owned entities, banks and financial institutions. Having reviewed the published accounts/financial statements we will have to raise voice and this will be helpful to improve our accountability system of the organization.
