1.1 BACKGROUND TO THE STUDY
Money is an organization tool which is used for proper management, control and co-ordination. Economically, it is said to be scare in supply and the scare nature of it makes it necessary for good and effective management. Every organization whether small or large, requires good Accounting system for efficient management and control of her finances which may be done through a specified method as: i. Controlling of Assets ii. Internal/External Auditing iii. Keeping of Proper Books iv. Preparation of Financial Statement v. Compliance with Legislation/Statutory Requirement. A good Accounting System would provide orderly assembly of Accounting Information and from the basis of continuity. Polytechnics though tertiary institutions like any other organization are required by law establishing them to prepare accounts which are in conformity with general accepted principles of accounting so also with Kaduna Polytechnic which form the basis of this study. Higher institution of learning established by Decree/Act (Kaduna Polytechnic) been one, operate accounting system some how similar to a great extent. It is of paramount importance at this juncture to have a broad knowledge of accounting system and funds accounting as it applies to tertiary institution. Accounting system is the art of recording and controlling an organization by keeping accurate book-keeping of business transactions articulate to form an accounting process.
Finney and Miller (1971) define Funds Accounting as “an independent fiscal and accounting entity with a self-balancing set of recording cash and other resources together with all related liabilities, obligation, reserves, and equities which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restriction or limitation. Public funds accounting tends to vary due to management policies differences. Though this higher institution of learning which are established for objective reasons are not profit oriented , there accounting systems are based on Historical cost concept, which indicates that Assets and liabilities are shown in the accounts at their Historical cost rather than current market value.
It is a common knowledge that all businesses and non business organizations including government runs on money equally, like there are wide range or ways of spending (expending funds). So also there are also variety of ways of generating it. Source of fund refer to the different ways available to business enterprises through which it can mobilize money (funds to finance its operation i.e. from planning, conception, take up buying of fixed assets to day to day operations. Example of this are: a. Decrease in assets i.e selling o your business assets such as land, building equipments, machineries to raise funds which can be recycled back into the business. b. An increase in liabilities i.e borrowing from banks and other financial institutions in a form of loans, overdraft and debentures. c. Plough back profit (Net profit re-injection). Instead of paying dividend to shareholders, the •profit is recycled back into the business. d. Reserves and depreciating: This is an amount kept aside for some special purposes and for the rainy day. It is normally taken out of the net profit yearly during appropriation. e. An increase in equity holding:
That is creation and issuance of additional common stock and preferred stock to raises more funds. f. Sales of stock of goods: By stock of goods, we mean both raw materials, work in progress and finish goods. Any of them, can be disposed o, to a willing buyer to raise additional funds. g. Grants, Aids and Donations from government and nongovernmental agencies both local and foreign donor agencies, multi-lateral organizations, economic and financial institutions across the world. h. Internal sources, sale of forms, transcript forms employment forms, sales of bread and tender fee. Just like funds are generated through different means and way, so also its usage. Organizational funds are primarily spent in any or combination of the under listed ways: a. An increase in assets i.e buying more assets such as land, buildings, equipment and machineries etc. b. A decrease I liabilities, that is paying o debts, debentures and other sundry liabilities and commitments. c. Payment of dividend to equity holders — funds generated can be used to settle dividend darning payable to shareholders of the business firm.