January 12th, 2012 | Accounting |
One of the first books to deal with modern accounting was first published in Venice in 1494. It was written by Luca Pacioli. It was called Review of Arithmetic, Geometry, Ratio and Proportion. In it there was a lengthy discourse on bookkeeping. This section was called Details of Accounting and Recording. Merchants were the ones who really used such a book. It’s interesting that it is the first known record of a lengthy discourse on the subject.
New modern accounting started from this discourse. In this book, this is the first time that the plus and minus symbols were used in any book having to do with accounting. This became the standard in the Italian Renaissance mathematics. Another first in this book was the use of algebra. The system of the double entry was also first used in this book. This is just a little bit of interesting history on accounting, for which we owe some debt to Pacioli for laying the basis for modern accounting.
We all know about the scandals involving Enron, WorldCom, Quest, Sunbeam and the list goes on. It shows how management moved the figures around to make it look like things were far better profit wise. So it’s much better to be honest in all forms of accounting. This includes financial accounting, business accounting or just providing accounting info. The accounting standards are high when you have to do it the right way. It’s really the best way.
One of the things that was done after the Enron scandal was the passage of the Sarbanes-Oxley Act. It made for higher criminal penalties for securities fraud. This also goes for changing or making up records when these are under investigation. This goes for trying to cheat the shareholders out of their money. In all these cases and many more we see the highly important point of honesty in accounting. Not only is this good for business, it will help you be successful!
November 20th, 2011 | Accounting |
Management Accounting and Cost Accounting
Management or cost accounting is a management information system which analysis data to provide information as a basis for managerial action. The concern of a management accountant is to present accounting information in the form most helpful to management.
Financial Accounting
Financial accounting is mainly a method of reporting the results and financial position of a business. It is not primarily concerned with providing information towards the more efficient conduct of a business. This is particularly clear in the context of the published accounts of limited companies. Accounting standards and public law prescribe that a company should produce accounts to be presented to the shareholders.
Financial Management
The financial manager is responsible for raising finance and controlling financial resources. Including the following decisions:
(a) Should the firm borrow from a bank or raise funds by issuing shares?
(b) How much should be paid as a dividend?
(c) Should the firm spend money on new machinery?
(d) How much credit should be given to customers?
(e) How much discount should be given to customers who pay early?
Auditing
The annual accounts of a company must generally be audited by a person independent of a company. In practice, this often means that the members of the company appoint a firm of registered auditors to investigate the financial statements and report as to whether or not they show a true and fair view of the companies results for the year and its financial position at the end of the year.
Qualities of Good Accounting Information
Below are some features that accounting information should have if it is to be useful:
Relevance
Comprehensibility
Reliability
Completeness
Objectivity
Timeliness
Comparability
November 10th, 2011 | Accounting |
Small offline businesses often operate on a shoestring budget, relying on getting by on personal credit cards and the like during slow times and trying to get them paid back down during the better times. Since almost every industry is cyclic in nature, this happens time and time again. As a result, small offline businesses often rely on the Internet for much of their legal, accounting and other needed information.
The risk these small offline business owners take is that they’ll often fall victim to ‘accurate misinformation’, a new phenomenon that has resulted from the world-wide scope of information online. The term accurate misinformation refers to information that is true and valid in the jurisdiction where it’s written, but is not necessarily applicable elsewhere. Hence it’s accurate in that locale and misinformation elsewhere.
Small offline businesses usually recognize that they can’t use the information from another country in their legal and accounting issues, but may well be misled by information applicable to only a part of the country they operate in. For example, rules pertaining to taxes, laws and by-laws can vary from state to state, province to province, department to department, and often even differ in each municipality.
Remember, small offline business owners and solo entrepreneurs are fairly savvy, or they wouldn’t be in business long in today’s challenging economic times. So most know to disregard the financial and legal information posted by non-professionals and that they should only follow the advice of licensed and accredited professionals. But they do run the risk of falling victim to accurate misinformation when it’s published by a legitimate professional, especially if the web page they’re reading doesn’t list the exact location of the firm or individual offering up that info.
As a small business owner you know you have to exercise caution and prudence in all aspects of legal and accounting practices – just be sure that prudence extends to avoiding accurate misinformation. No matter how tight the budget, find a way to get solid business, accounting and legal advice from licensed professionals in your own community – it’s the only way to be sure you’re operating in full compliance with the rules and regulations in place where your small business operates.