As shown by the valuable results of researches on the existing records of accounts, business accounting has traveled a long and winding path to the present double entry bookkeeping system through much trial-and-error for hundreds of years since the beginning of the thirteenth century (Izutani, 1980). Initially, business accounting was formulated as an income determination system for individual companies. With the establishment of the modern corporation system, particularly in the first half of the 19th century, business accounting, which had been working as the income determination system for individual companies, assumed a new role as a social control system, i.e., the distributable income determination system to "protect creditors" (Littleton, 1933, pp. 242).
Today, individual departments within an organization frequently require financial information that is tailored for their operations. According to David (2002), one size does not fit all when it comes to financial information. Financial information systems should provide a system wherein the details roll up to summarize the information and the information used for decision making is consistent with and reconciled with the organization’s financial records.
David (2002) lists the elements of the hierarchy of financial needs as follows:
- Budget Information – this element is the foundation of the hierarchy. It provides data on the amount of money available for expenditure on a program, project, or service.In addition, it provides revenue projections for which money is expected to be available for expenditures.
- Status of Funds – this element is the second element of the hierarchy. It provides financial information as to where an organization or department stands in relation to expenditures/obligations and the budget’s remaining balance.In addition, it provides information on revenue receipts in comparison to the projected budgeted revenue.
- Cost Management – provides information on resource use by program, project or service, irrespective of the source of funds. According to David (2002), most financial systems do not provide a cost management system.Therefore, the need exists to have cost management as part of the financial system in order to provide resource use for individual programs, projects, and services.
- Cost/Performance – this element is considered to be the top of the hierarchy. It intersects the cost of services, programs, and projects with their respective performance levels. Thus, it notes the relationship of service, program, or project results with the cost for attaining these results.