Family Accounting System | Characteristics | Necessity
Concept of Family Accounting System
Family is said to be the destination of happiness. For the sake of this happiness, each and every person thinks about living an improved family life. Planning is necessary to lead the family nicely and systematically and the application of appropriate accounting is an indispensable part of that plan. A family without a financial plan cannot be maintained properly. Without maintaining of family income and expenditure account, a family cannot live a disciplined life. As a result, family happiness may be disturbed. So maintaining family income and expenditure accounts is also essential like business organizations.
Family is not a business organization so the accounting system is different since Family is a non-profit making continuous organization. Like other organizations, some financial transactions occur in a family. That is, there are some income and expenditure. So maintaining of family budget is essential. There should be a predefined plan for maintaining the family smoothly and happily within the limit of income.
Characteristics of Family Accounting System
The salient features of the family accounting system:
1. Non-profit making organization: Family is considered to be a non-profit making organization. The question of profit and loss does not arise here, so a family can know surplus or deficit through the preparation of income - expenditure account and financial statement at the end of a particular period.
2. Assumption of separate unit: Each family member of the family considered separately from the head for completing the accounts.
3. Responsibilities: Family accounts are not to be submitted to anyone. So there is no need for its audit or responsibility.
4. Cash transaction: Most transactions of the family are done in cash, so it is easy for record keeping.
5. Specific head: In most cases, family transactions have some specific heads.
Necessity of Family Accounting System
For a happy and healthy life within the limit of income, it is essential to maintain proper accounts. The necessity of family accounts is as follows:
1. Proper Planning: Transparency can be ensured if accounts are kept properly, thus family ties can be enjoyed more vividly.
2. Family Solvency: "Expenditure within income" - if this policy is followed, it may be possible to attain financial solvency and happiness of the family.
3. Creation of values: Family accounting can ensure transparency which can help create values and ethics between the family members.
4. Family Budget: Preparation of a family budget and with the help of it, proper management of the family can be ensured by controlling all the income and expenditures.
5. Saving and Consumption Tendency: For a better lifestyle in the future, money should be saved from the present income. If accounts are kept properly, the habit of unnecessary expenditure decreases, and the tendency of saving increases.
6. Family Discipline: The possibility of arising of any dispute and misunderstanding among the head and other members of the family is least if accounts are kept systematically and properly.
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