International developments in accounting Essay Example | Topics and Well Written Essays - 2000 words

International developments in accounting - Essay Example The historical development of accounting in India can be mainly traced along three period viz. before the colonial era, during the colonial era and in the postcolonial period. Pre-colonial period in India dates back to the time of Mohenjo-Daro and Harappa civilizations where the functions of commerce and trade started flourishing on a gradual scale. In these periods the accounting practice depended on a system of bookkeeping originally prevalent in Greece. Further documentary evidence of historical accounting systems can be found in the Smritis, which contained rules, and regulations of partnership dealings. With the emergence of the Chandragupta Empire the practice of accounting system earned huge focus with the works of Kautilya or Chanakya. Kautilya developed the treatise of ‘Arthashastra’, which depicted the different rules, regulations, and ethical conducts of accounting practices. However with the emergence of the British colonialists, India started becoming the ho me ground for rapid industrialization wherein the accounting systems became more scientifically treated to meet the complex industrial and trade demands (Hopwood & Chapman, 2008, pp.1399-1400). Colonial and post-colonial India became filled by many small groups of industries, which generally maintained records based on conservative and traditional practices. These industries generally did not feel the urge to maintain large sets of accounting records for business purposes and thus relied on traditional practices like ‘Single Entry Book Keeping’ (Mukherjee & Hanif, 2003, p.22.1). Traditional Accounting Systems in India The accounting systems in use in India during the traditional period were systematic and laid main focus on the receipt and payment system. Furthermore the practice of accounting was not conducted in an isolated manner but served a continuity of different periods. The period for which the accounts were developed varied along daily, weekly, bi-weekly, month ly or for annual periods. However in such systems the monetary transactions were not carried forward from one period to another. Separate heads were created for different nature of accounts maintained and strict governance was maintained depending on timing deadlines. Further for each of the separate transactions conducted a written record was mandatorily maintained which was produced on request. The person responsible for the keeping and maintenance of such accounting records also conducted separate audits to verify their authenticity (Sarkar, 2003, p.248). The practice of accountancy in Indian context can also be studied along the system of bookkeepings, which were prevalent in the accounting practices. The system of bookkeeping refers to the style of maintaining and recording of financial transactions under the separate books of accounts. Book keeping systems maintained in the Indian context contained of four different types of practices viz. Cash, Single Entry, Indian and Double Entry. The ‘Cash System’ of maintaining records of financial transactions is carried out in those concerns where sales and purchases are conducted only on the basis of cash. Here in case of credit transactions they are accounted at later periods when met in cash. Moreover the ‘Cash System’ of financial book keeping also depended on the maintaining of revenue and expenditure accounts to check the position of