By Vikki Allen
There is no mystery to the basis of bookkeeping ie: for every debit there must be corresponding credits, but which is what and where does it go?
Lets first un-mystify some of the terminology and in future articles we can get down to practicalities.
INCOME -
This can be broken down into 2 groups,
1. Sales - This is the money generated from the sale of goods or services before taking anything off for costs or discounts etc.
2. Other Income - This is any other money received into the business by way of interest, discounts or anything not directly related to the product or service of the enterprise.
EXPENDITURE (Expenses) -
Again this can be broken down into 2 groups,
1. Cost of Sales - anything directly purchased, including labour (wages), to produce the stuff you sell.
2. Expenses - everything else you have to pay for to run the business.
Example: Say the business makes wooden boxes, the wood you buy and the carpenters wages are direct costs but the electricity used and the paper used for invoices are not. They are more like support services and therefore expenses.
PROFIT & LOSS -
Gross profit (or loss) is the difference between the sales and cost of sales.
Net profit (or Loss) is what's left after taking the expenses off the Gross profit and adding any Other Income.
Note: Profit does not necessarily equal money in the bank, your profit is a number on a page that could be represented by stock on the shelf, material in the factory, half completed projects or fixed assets. It is ironic but the business could be in heavy overdraft but still be profitable - this is called a cash flow problem (or 'the cheque is in the mail').
ASSETS -
These are also broken down into 2 groups.
1. Fixed Assets - owned by the business, such as buildings, plant & equipment, vehicles etc. Things that are necessary to generate the income and run the business that are going to be kept for a long time and cannot be easily converted to cash.
2. Current Assets - Things of a short term nature (under 12 months) easily converted to cash and of course cash itself, bank account, short term investments, debtors.
LIABILITIES -
Also broken down into 2 groups.
1. Long term liabilities - any loans, bonds, HP etc to be paid off over a period longer than 12 months.
2. Current liabilities - anything that needs to be paid out within the current financial year (12 months) such as creditors, short term loans and not forgetting the bank account if it is in overdraft.
OWNERS EQUITY -
The first thing to get our head around is that the owner of the business and the business itself must be seen as two separate individual entities, so even if you are the sole owner of your business - you are not the business itself.
Once this is understood it is easy to see that Owners Equity is the difference between the Assets and Liabilities and depending which way it swings could either be owed TO the owner or owed BY the owner to the business.
DEBTORS -
Those that owe the business money.
CREDITORS -
Those that the business owes money to.
INCOME STATEMENT -
A record of the day to day income and expenses of the business during the financial year. At the end of each financial year the values on the income statement are brought to zero for the start of the new year and only the profit or loss are carried over to the balance sheet.
BALANCE SHEET -
A snapshot of the status of a business at any point in time made up of the Assets, Liabilities and Owners Equity. These values which change according to movements in the business are carried forward from year to year.
DEBITS & CREDITS -
Note: Not the same as Debtors and Creditors (see above)
When recording your transactions you would divide your page into two columns - Debits on the left and Credits on the right (just remember Dogs first, Cats second). Now comes the 'which goes where'
Costs & Expenses - Debit
Income - Credit
Assets - Debit
Liabilities - Credit
TRIAL BALANCE -
Once you have sorted everything into your two columns, add each one up and they should balance with each other (if not you have boobed somewhere) - this is your trial balance and it is from here that all information is gathered to make up the Financial Statements of the business.
Vikki Allen is a Financial Manager with 15 years bookkeeping experience, an Advanced Diploma in accounting and a Post Graduate Diploma in Forensic Auditing & Criminal Justice from the University of KwaZulu Natal.
Article Source: http://EzineArticles.com/?expert=Vikki_Allen
Sabtu, 30 Agustus 2008
Accrual Accounting Or Cash Accounting - Which Method is Best For Your Business?
By Richard T. Tyler
Business accounting usually falls under one of two categories, accrual or cash. A business has to choose which one is the most suitable for them, but both methods have their merits. This article will highlight the pros and cons of both methods so you can make an informed decision.
Some people love the cash method of accounting. This method is based on when the money is transacted. For example if my business sells $10,000 worth of goods in December, but if the money is received in January, then it is recorded on the books for January of the following year.
The advantage of using cash accounting is that it can help you record the high and low points. For example it can help you realise when customers are late with payments, or customers who change their mind. These transactions are shown in the books when the money comes in, so you can tell how your business is doing financially and up to date. The disadvantage is that the cash method shows you how and when your business are making money, however not how much business you're doing per month. For example you could get a large order in December, so you have to fork out a lot of cash for this order. However your books might show you getting paid January, even though the deal was done in Dec, the books show a better month in Jan than Dec.
Now the accrual method of accounting involves deal dates rather than actual funds. . If I sell my merchandise, my books will reflect the sale as the day the goods leave the warehouse. Also if I buy a new piece of machinery for my business, the amount spent is deducted from my books on the day the machine arrives. Even though I might not pay for the machine, the transaction is considered complete in my books.
Using this method of accounting is like forecasting how your business is doing. This method is great for companies who wish to use their accounting books to budget for expenses and outgoings. However the disadvantage to using this method is that it will give you a skewed image of how your business is actually doling. For example, sales may appear to be soaring in Dec and the transactions are recorded, but the money actually comes in until Jan.
Generally when a business has less than $5 million in sales in a year can choose either method. For the companies that make over that amount, or keep an inventory of goods for sale, are required to use the accrual method of accounting.
Both methods paint a different financial picture for a company. Purchase trends depend on the product sold, and that in turn decides how a company should look after its finances.
Richard Tyler is a happily retired investment guru who ran several successful businesses during his earlier years. He now shares his wealth of knowledge on investment, business and strategic wealth management at Invest Money Stocks. For more free useful articles on business planning please visit Invest Money Stocks.
Article Source: http://EzineArticles.com/?expert=Richard_T._Tyler
Business accounting usually falls under one of two categories, accrual or cash. A business has to choose which one is the most suitable for them, but both methods have their merits. This article will highlight the pros and cons of both methods so you can make an informed decision.
Some people love the cash method of accounting. This method is based on when the money is transacted. For example if my business sells $10,000 worth of goods in December, but if the money is received in January, then it is recorded on the books for January of the following year.
The advantage of using cash accounting is that it can help you record the high and low points. For example it can help you realise when customers are late with payments, or customers who change their mind. These transactions are shown in the books when the money comes in, so you can tell how your business is doing financially and up to date. The disadvantage is that the cash method shows you how and when your business are making money, however not how much business you're doing per month. For example you could get a large order in December, so you have to fork out a lot of cash for this order. However your books might show you getting paid January, even though the deal was done in Dec, the books show a better month in Jan than Dec.
Now the accrual method of accounting involves deal dates rather than actual funds. . If I sell my merchandise, my books will reflect the sale as the day the goods leave the warehouse. Also if I buy a new piece of machinery for my business, the amount spent is deducted from my books on the day the machine arrives. Even though I might not pay for the machine, the transaction is considered complete in my books.
Using this method of accounting is like forecasting how your business is doing. This method is great for companies who wish to use their accounting books to budget for expenses and outgoings. However the disadvantage to using this method is that it will give you a skewed image of how your business is actually doling. For example, sales may appear to be soaring in Dec and the transactions are recorded, but the money actually comes in until Jan.
Generally when a business has less than $5 million in sales in a year can choose either method. For the companies that make over that amount, or keep an inventory of goods for sale, are required to use the accrual method of accounting.
Both methods paint a different financial picture for a company. Purchase trends depend on the product sold, and that in turn decides how a company should look after its finances.
Richard Tyler is a happily retired investment guru who ran several successful businesses during his earlier years. He now shares his wealth of knowledge on investment, business and strategic wealth management at Invest Money Stocks. For more free useful articles on business planning please visit Invest Money Stocks.
Article Source: http://EzineArticles.com/?expert=Richard_T._Tyler
Credit Applications - The Key to Successful Collection Efforts
By Neil Murray
With the economy being what it is, your job in accounts receivable is more difficult than ever. It is even more difficult if you happen to be a Credit Manger or Controller and are saddled with the task of granting credit in this very volatile market. History shows that one of the many keys to that process and to successful collection efforts when that account does not pay, is a solid credit application.
Here are some key points to remember when it comes to credit applications:
Have a good solid credit application, not just customer information statement.
Do not beat around the bush in fear of not gaining a customer. You are looking at your customer's ability to repay this and future debts. You are going to extend your company's resources on the hope that they will pay you when the terms dictate. If they want to do business with you, and they are an upstanding company, they will understand. Chances are they have a credit application from their customer.
Do not be afraid to go back and ask for complete information.
Sometimes a prospective customer will rush through the application and omit information that is not in front of them at that moment. Get that information. Sometimes it is lazy omission, and sometimes it is omitted on purpose. You need all of the answers to make an informed lending decision.
Get the Personal Guarantee (PG).
Someone needs to be able to be held personally responsible should the company default. You need that person's name, address, and phone number at the very least. It is even more to your benefit if you can get their social security number, driver's license number, date of birth, etc. The more information you have, the easier it will be to collect down the road.
Set a limit, and stick to it.
A large percentage of accounts that end up in collection are over the agreed upon credit limit. If you set a credit limit, stick to it until you are comfortable with the way the customer is paying. If they have not paid for prior orders, what makes you think they will pay for future orders? Salespeople will accuse you of turning away business, but it is bad business.
Sales are not the key to your success, paid invoices are.
It is not a sale until it is paid for.
Accounts receivable are not assets - they are liabilities.
You can quote me on that!
About the author: Neil Murray is one of the founding partners of Hamilton & Monroe, LLC. Hamilton & Monroe is a professional Commercial Collections firm. They can be found on the web at http://www.hamiltonandmonroe.com, or by calling toll-free (800) 313-9611. If you would like a generic credit application that you can edit and use for your business, please contact us at info@hamiltonandmonroe.com.
Article Source: http://EzineArticles.com/?expert=Neil_Murray
With the economy being what it is, your job in accounts receivable is more difficult than ever. It is even more difficult if you happen to be a Credit Manger or Controller and are saddled with the task of granting credit in this very volatile market. History shows that one of the many keys to that process and to successful collection efforts when that account does not pay, is a solid credit application.
Here are some key points to remember when it comes to credit applications:
Have a good solid credit application, not just customer information statement.
Do not beat around the bush in fear of not gaining a customer. You are looking at your customer's ability to repay this and future debts. You are going to extend your company's resources on the hope that they will pay you when the terms dictate. If they want to do business with you, and they are an upstanding company, they will understand. Chances are they have a credit application from their customer.
Do not be afraid to go back and ask for complete information.
Sometimes a prospective customer will rush through the application and omit information that is not in front of them at that moment. Get that information. Sometimes it is lazy omission, and sometimes it is omitted on purpose. You need all of the answers to make an informed lending decision.
Get the Personal Guarantee (PG).
Someone needs to be able to be held personally responsible should the company default. You need that person's name, address, and phone number at the very least. It is even more to your benefit if you can get their social security number, driver's license number, date of birth, etc. The more information you have, the easier it will be to collect down the road.
Set a limit, and stick to it.
A large percentage of accounts that end up in collection are over the agreed upon credit limit. If you set a credit limit, stick to it until you are comfortable with the way the customer is paying. If they have not paid for prior orders, what makes you think they will pay for future orders? Salespeople will accuse you of turning away business, but it is bad business.
Sales are not the key to your success, paid invoices are.
It is not a sale until it is paid for.
Accounts receivable are not assets - they are liabilities.
You can quote me on that!
About the author: Neil Murray is one of the founding partners of Hamilton & Monroe, LLC. Hamilton & Monroe is a professional Commercial Collections firm. They can be found on the web at http://www.hamiltonandmonroe.com, or by calling toll-free (800) 313-9611. If you would like a generic credit application that you can edit and use for your business, please contact us at info@hamiltonandmonroe.com.
Article Source: http://EzineArticles.com/?expert=Neil_Murray
Can't Make Sense of Your Numbers? 8 Reasons Why Dynamics GP Might Be Right For Your Business
By Vinnie Campagna
Still not convinced that GP is the way to go? Here are 8 reasons why Great Plains may be the right accounting software for you.
1. Familiar. Microsoft Dynamics GP is designed with a familiar look to it that is fully integrated with Microsoft Office. If you're familiar with Microsoft Office, you will understand a lot of the functionality of Microsoft Dynamics GP right away.
2. Portable. Microsoft Dynamics GP has a Business Portal feature that comes free with every installation. This means that you're data is not just available at the office. It can be accessed via the Internet from anywhere at anytime of day or night. Why hire a web developer for reports when there are a lot of great reports available right through business portal?
3. Experienced. Great Plains software began in 1981. With nearly 30 years of accounting software upgrades under its belt, Great Plains has been in industry leader. It seems natural that the leading accounting software company would join forces with a software leader like Microsoft.
4. Integrated. Dynamics GP has been redesigned to work seemlessly with Windows Servers and Windows Workstation, along with the popular MS Office Suite.
5. Great for HR. What's good for HR is good for you. And Great Plains loves giving great tools for your Human Resources manager to manage your payroll and benefits better.
6. Inventory Control. Always guessing if you need to make a purchase? Guess no more with fully integrated warehousing and inventory control built right into Great Plains.
7. Purchasing Power. Great Plains knows that plenty need to be purchased to keep you ship running in top shape. From materials to product, have it all under control w/ GP.
8. Control. You have complete control with Dynamics GP. There is detailed reporting available with user activity and controls. Extensive permissions and logging are built in to keep your house as secure as it is productive.
Bottom line, there is no other accounting package available today which includes as many features into a software package that's so easy to use.
Remember, switching to Dynamics GP is not for everyone. Some organizations would rather push there outdated software to the limits. And maybe that strategy works best for them. But if growth is what you're after, you may be cheating your company's growth potential by not getting the best tools to do your job. And becoming able to identify opportunities easier is a great feeling.
Whichever direction your decision may take you, please stay knowledgable in the financial happenings of your company and be ready to sieze the day!
Vinnie Campagna is a Systems Integrater and Chief Technologist for Haruspex, a value added provider of Accounting, Inventory control, and order management software. Haruspex has been helping companies be successful for over 15 years. Be sure to rely on experienced professionals to implement your software solution. And be sure to visit Haruspex.com for more great information on Microsoft Dynamics GP
Article Source: http://EzineArticles.com/?expert=Vinnie_Campagna
Still not convinced that GP is the way to go? Here are 8 reasons why Great Plains may be the right accounting software for you.
1. Familiar. Microsoft Dynamics GP is designed with a familiar look to it that is fully integrated with Microsoft Office. If you're familiar with Microsoft Office, you will understand a lot of the functionality of Microsoft Dynamics GP right away.
2. Portable. Microsoft Dynamics GP has a Business Portal feature that comes free with every installation. This means that you're data is not just available at the office. It can be accessed via the Internet from anywhere at anytime of day or night. Why hire a web developer for reports when there are a lot of great reports available right through business portal?
3. Experienced. Great Plains software began in 1981. With nearly 30 years of accounting software upgrades under its belt, Great Plains has been in industry leader. It seems natural that the leading accounting software company would join forces with a software leader like Microsoft.
4. Integrated. Dynamics GP has been redesigned to work seemlessly with Windows Servers and Windows Workstation, along with the popular MS Office Suite.
5. Great for HR. What's good for HR is good for you. And Great Plains loves giving great tools for your Human Resources manager to manage your payroll and benefits better.
6. Inventory Control. Always guessing if you need to make a purchase? Guess no more with fully integrated warehousing and inventory control built right into Great Plains.
7. Purchasing Power. Great Plains knows that plenty need to be purchased to keep you ship running in top shape. From materials to product, have it all under control w/ GP.
8. Control. You have complete control with Dynamics GP. There is detailed reporting available with user activity and controls. Extensive permissions and logging are built in to keep your house as secure as it is productive.
Bottom line, there is no other accounting package available today which includes as many features into a software package that's so easy to use.
Remember, switching to Dynamics GP is not for everyone. Some organizations would rather push there outdated software to the limits. And maybe that strategy works best for them. But if growth is what you're after, you may be cheating your company's growth potential by not getting the best tools to do your job. And becoming able to identify opportunities easier is a great feeling.
Whichever direction your decision may take you, please stay knowledgable in the financial happenings of your company and be ready to sieze the day!
Vinnie Campagna is a Systems Integrater and Chief Technologist for Haruspex, a value added provider of Accounting, Inventory control, and order management software. Haruspex has been helping companies be successful for over 15 years. Be sure to rely on experienced professionals to implement your software solution. And be sure to visit Haruspex.com for more great information on Microsoft Dynamics GP
Article Source: http://EzineArticles.com/?expert=Vinnie_Campagna
Record Keeping? Paperwork? Yuck!
By Tina Marino
When I taught the Small Business Tax & Accounting Workshops at the SBA's Small Business Development Center, the one thing I was emphatic about is the need to keep good records. I must've sounded like a broken record to the attendees! But, it is true. While you may groan about it and even hate it, record keeping is vital to the heartbeat of a business.
Benjamin Franklin said that there is nothing certain but death and taxes. The bible says that we should render unto Cesar what is Cesar's. Both are true statements. However, though we must pay taxes we need to be sure to not pay one shekel more than we have to!
Good record keeping will:
Help you pay only the taxes you actually owe. By having an up-to-date and accurate set of books, you will be able to do very precise tax planning which will allow you to keep more of your hard-earned money in your own pocket.
Give you all the information you need to make sound business decisions. It can track cycles in your sales, tell you which products or services you should keep and which you should stop selling, allow you to decide whether to hire new employees or let some go, and more.
Allow you to prepare detailed budgets and forecasts. If you know where you've been and what it cost, you are able to project more accurately.
Provide you a historical record of your business. The longer you are in business, the more important and informative looking back on your progress will be.
Assist you in obtaining bank loans, lines of credit, vendor credit, and more. Lenders always require complete and detailed financial statements and projections before they will show you the money.
Help you easily keep compliant with federal, state, county and local governing agencies.
Make tax season a breeze! Since you will have done tax planning throughout the year, you will already know your tax bill. Your records can be easily sent, complete and accurate, to your accountant for tax preparation. You will make his or her life (and your invoice from them) much easier.
Allow you to sleep like a baby at night! You won't be tossing and turning in turmoil because you will always know where you stand.
Think about this: Every $100 you don't keep track of will cost you $15 to $60 in additional tax.
Find more business accounting and tax resources at www.BusinessAccountingBasics.com
Tina Marino
Minister, Author, Speaker, Business Broker
tina@tinamarino.com
Article Source: http://EzineArticles.com/?expert=Tina_Marino
When I taught the Small Business Tax & Accounting Workshops at the SBA's Small Business Development Center, the one thing I was emphatic about is the need to keep good records. I must've sounded like a broken record to the attendees! But, it is true. While you may groan about it and even hate it, record keeping is vital to the heartbeat of a business.
Benjamin Franklin said that there is nothing certain but death and taxes. The bible says that we should render unto Cesar what is Cesar's. Both are true statements. However, though we must pay taxes we need to be sure to not pay one shekel more than we have to!
Good record keeping will:
Help you pay only the taxes you actually owe. By having an up-to-date and accurate set of books, you will be able to do very precise tax planning which will allow you to keep more of your hard-earned money in your own pocket.
Give you all the information you need to make sound business decisions. It can track cycles in your sales, tell you which products or services you should keep and which you should stop selling, allow you to decide whether to hire new employees or let some go, and more.
Allow you to prepare detailed budgets and forecasts. If you know where you've been and what it cost, you are able to project more accurately.
Provide you a historical record of your business. The longer you are in business, the more important and informative looking back on your progress will be.
Assist you in obtaining bank loans, lines of credit, vendor credit, and more. Lenders always require complete and detailed financial statements and projections before they will show you the money.
Help you easily keep compliant with federal, state, county and local governing agencies.
Make tax season a breeze! Since you will have done tax planning throughout the year, you will already know your tax bill. Your records can be easily sent, complete and accurate, to your accountant for tax preparation. You will make his or her life (and your invoice from them) much easier.
Allow you to sleep like a baby at night! You won't be tossing and turning in turmoil because you will always know where you stand.
Think about this: Every $100 you don't keep track of will cost you $15 to $60 in additional tax.
Find more business accounting and tax resources at www.BusinessAccountingBasics.com
Tina Marino
Minister, Author, Speaker, Business Broker
tina@tinamarino.com
Article Source: http://EzineArticles.com/?expert=Tina_Marino
Luca Pacioli and Leonardo DaVinci - Domestic Partnership of Genius
By Marciano Guerrero
Luca Pacioli and Leonardo DaVinci--Renaissance men--were both mathematical geniuses. Leonardo was more inclined towards military engineering, while Luca towards abstract and pure math. When Pacioli included "Double Entry Bookkeeping" in his textbook, Summa de Aritmetica, which he published in 1494 (two years after Christopher Columbus landed in Santo Domingo), little did he know he would change the world.
Leonardo Da Vinci and a monk named Luca Pacioli--the inventor of Accounting (debits and credits), lived together for many years. Luca's math textbook contained the basic notions that accountants follow today: Assets equal liabilities plus owner's equity (A=L + OE).
Both being college professors travelled together and stayed together at different universities.
Sigmund Freud-in his study on Leonardo's homosexuality- ignored this fact. It is a pity because Freud would have brought out factual evidence rather than wild speculations based on his physchoanalytic techniques. Leonardo, being much younger than Luca, has always been described as Luca's protege.
Today with time perspective we can understand they probably had a domestic partnership of sorts. In 1495 they lived together in Milan and Venice. Art Historians have well documented that Leonardo was summoned to court to address charges of homosexuality against him. But since the accuser did not show up, the charges were later dropped.
The diagrams and figures one sees in Luca'a Summa were DaVinci'a drawings. They worked together as equal partners rather than the master-apprentice relations of the times.
Billions of human beings have populated the earth, mostly living in the shadow of survival and mediocrity, the odd, the strange, and the eccentric are the ones who make the most invaluable contributions to the improvement of the human condition. These two eccentrics did make tangible contributions to mankind.
While Leonardo's accomplishments have been well chronicled and documented in our times--even Bill Gates couldn't resist owning Leonardo's original manuscripts--Luca's contributions are less known. Like our American composer Aaron Copland, I will play a fanfare for the common man: Luca by his ingenious explanation of Double Entry Bookkeeping system made possible international commerce, opening the flood-gates to what today we call "The Global Economy."
No longer were businesses confined within frontiers, as banks, financial institutions, entrepreneus, and corporations, bartered, exchanged, and extracted profits across frontiers. The standardization of Financial Statements followed, so that Balance Sheets, Income Statements, and Cash Flows are read and interpreted without major impediments all over Europe.
With capital formation in full thrust, the needed capital for factories became available, fostering thereby the advent of the European Industrial Revolution. By 1750 Europe was already industrialized, and by 1860 (after the Civil War) America became an industrial power.
Yes it was a leap of imagination to design Debits (left side) and credits (right side) as an information system. You write the assets on the left side of the equation, and the claims on those assets on right side.
In more than ten thousand years of recorded history, no one in the human race had attempted to keep business records by double entry. The Babylonians, Phoenicians, Persians, Egyptians, Greeks, Romans, and other ancient civilizations recorded their transactions on a cash basis and by a single entry; that is, business people made lists of items purchased and sold.
As a result, businesses remained small enterprises, doomed to remain small since the lack of an orderly system prevented growth. Whether in papyrus, sheep-skins parchments, or bricks, all business records were endless enumerations and catalogues, which offered little discernment into measurements of profit or loss.
Pacioli changed all that.
To think that a humble discovery such as double entry bookkeeping can change the destiny of the human race challenges credibility. But given that double entry allows not only for an orderly classification of accounts, journals, and ledgers, but also for measurements of liquidity and profitability, it isn't surprising to see that Capitalism bloomed.
In economic systems where Capitalism prevails, businesses--being the major employers-- offer medical coverage and retirement plans, man and woman can now enjoy the latest technologies and thereby live longer and in good health.
One can well imagine Luca and Leonardo discussing symmetries, constrasts, dichotomies, dualities, binary oppositions, polarities, antithesis, and other opposites:
"Physical nature exhibits all these dualities: day and night, narrow and wide, fast and slow," Luca would say, "and so does human nature."
"We carry good and evil, love and hatred, in our spirits and bodies--or as Heraclytus loved to say:'the way up is the way down, the narrow and the wide," Leonardo would reply.
"What about Ecclesiastes, Leonardo, --didn't he say...?
a time to be born and a time to die;
a time to plant and a time to uproot;
a time to kill and a time to heal;
a time to pull down and a time to build up;
a time to weep and a time to laugh;
a time for mourning and a time for dancing;
...
The observation of these doubles as a system of knowledge permitted Luca to expand it into the Accounting equation where what is on the left must equal what is on the right side (Assets = Liabilities + Owner's Equity). Later, accountants realized that another duality was needed: Revenues, which are increases in owner's equity, and Expenses decreases; the difference being no other than profits or losses.
With debits and credits pretty much established as a system of order, writers such as Descartes, Cervantes, Shakespeare, and Dickens imposed it in literature and philosophy by means of antithesis.
Descartes' cogito ergo sum, is the synthesis of a duality: mind and body.
In A Tale of Two Citites Dickens opens his novel with a detailed set of antheses:
It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way--
Although philosophers such as Hegel and Karl Marx attempted to discard the duality system by replacing it with a triad: thesis, antithesis, synthesis. They failed; and we can understand why: Hegel professed the State's power, while Marx communism. By now we know the chaotic results of Nazism and Communism.
The natural tendency is duality as proved by the Second Law of thermodynamics: order and chaos (enthropy). Though Nature tends to chaos, human nature imposes order; the mind invents patterns of understanding.
The Double entry Bookkeeping system is a triumph of the mind over the chaotic activities of humans engaged in trade. Not only did Double Entry brought forth a new economic system, but also the dawn of a new way of thinking: modernity. And modernity dispelled the mists of superstition, monsters, magic, witches, ogres, dwarfs, giants, miracles, chimeras, unicorns, centaurs, sirens, and other impossible figures of the supernatural.
The middle ages and feudalism yielded to modern times.
Luca Pacioli's legacy--accounting system--to the business world is order. It contains: Balance, wholeness, and radiance, because his system dovetails with Democracy, with Freedom to the entrepreneur; a system that coincides with Adam Smith's pillars of capitalism: Laissez-faire (free market economy), competition (Invisible Hand), and the Division of labor (the innate human propensity that creates wealth for all).
This is my fanfare to the common man, the humble monk--Luca Pacioli
Marciano Guerrero Retired Investment Banker, Corporate Controller, graduate of Columbia University, and Vietnam Vet (1967-1968). The writing techniques I use in writing stories and articles are all explained in: http://writerivetingprose.com
Article Source: http://EzineArticles.com/?expert=Marciano_Guerrero
Luca Pacioli and Leonardo DaVinci--Renaissance men--were both mathematical geniuses. Leonardo was more inclined towards military engineering, while Luca towards abstract and pure math. When Pacioli included "Double Entry Bookkeeping" in his textbook, Summa de Aritmetica, which he published in 1494 (two years after Christopher Columbus landed in Santo Domingo), little did he know he would change the world.
Leonardo Da Vinci and a monk named Luca Pacioli--the inventor of Accounting (debits and credits), lived together for many years. Luca's math textbook contained the basic notions that accountants follow today: Assets equal liabilities plus owner's equity (A=L + OE).
Both being college professors travelled together and stayed together at different universities.
Sigmund Freud-in his study on Leonardo's homosexuality- ignored this fact. It is a pity because Freud would have brought out factual evidence rather than wild speculations based on his physchoanalytic techniques. Leonardo, being much younger than Luca, has always been described as Luca's protege.
Today with time perspective we can understand they probably had a domestic partnership of sorts. In 1495 they lived together in Milan and Venice. Art Historians have well documented that Leonardo was summoned to court to address charges of homosexuality against him. But since the accuser did not show up, the charges were later dropped.
The diagrams and figures one sees in Luca'a Summa were DaVinci'a drawings. They worked together as equal partners rather than the master-apprentice relations of the times.
Billions of human beings have populated the earth, mostly living in the shadow of survival and mediocrity, the odd, the strange, and the eccentric are the ones who make the most invaluable contributions to the improvement of the human condition. These two eccentrics did make tangible contributions to mankind.
While Leonardo's accomplishments have been well chronicled and documented in our times--even Bill Gates couldn't resist owning Leonardo's original manuscripts--Luca's contributions are less known. Like our American composer Aaron Copland, I will play a fanfare for the common man: Luca by his ingenious explanation of Double Entry Bookkeeping system made possible international commerce, opening the flood-gates to what today we call "The Global Economy."
No longer were businesses confined within frontiers, as banks, financial institutions, entrepreneus, and corporations, bartered, exchanged, and extracted profits across frontiers. The standardization of Financial Statements followed, so that Balance Sheets, Income Statements, and Cash Flows are read and interpreted without major impediments all over Europe.
With capital formation in full thrust, the needed capital for factories became available, fostering thereby the advent of the European Industrial Revolution. By 1750 Europe was already industrialized, and by 1860 (after the Civil War) America became an industrial power.
Yes it was a leap of imagination to design Debits (left side) and credits (right side) as an information system. You write the assets on the left side of the equation, and the claims on those assets on right side.
In more than ten thousand years of recorded history, no one in the human race had attempted to keep business records by double entry. The Babylonians, Phoenicians, Persians, Egyptians, Greeks, Romans, and other ancient civilizations recorded their transactions on a cash basis and by a single entry; that is, business people made lists of items purchased and sold.
As a result, businesses remained small enterprises, doomed to remain small since the lack of an orderly system prevented growth. Whether in papyrus, sheep-skins parchments, or bricks, all business records were endless enumerations and catalogues, which offered little discernment into measurements of profit or loss.
Pacioli changed all that.
To think that a humble discovery such as double entry bookkeeping can change the destiny of the human race challenges credibility. But given that double entry allows not only for an orderly classification of accounts, journals, and ledgers, but also for measurements of liquidity and profitability, it isn't surprising to see that Capitalism bloomed.
In economic systems where Capitalism prevails, businesses--being the major employers-- offer medical coverage and retirement plans, man and woman can now enjoy the latest technologies and thereby live longer and in good health.
One can well imagine Luca and Leonardo discussing symmetries, constrasts, dichotomies, dualities, binary oppositions, polarities, antithesis, and other opposites:
"Physical nature exhibits all these dualities: day and night, narrow and wide, fast and slow," Luca would say, "and so does human nature."
"We carry good and evil, love and hatred, in our spirits and bodies--or as Heraclytus loved to say:'the way up is the way down, the narrow and the wide," Leonardo would reply.
"What about Ecclesiastes, Leonardo, --didn't he say...?
a time to be born and a time to die;
a time to plant and a time to uproot;
a time to kill and a time to heal;
a time to pull down and a time to build up;
a time to weep and a time to laugh;
a time for mourning and a time for dancing;
...
The observation of these doubles as a system of knowledge permitted Luca to expand it into the Accounting equation where what is on the left must equal what is on the right side (Assets = Liabilities + Owner's Equity). Later, accountants realized that another duality was needed: Revenues, which are increases in owner's equity, and Expenses decreases; the difference being no other than profits or losses.
With debits and credits pretty much established as a system of order, writers such as Descartes, Cervantes, Shakespeare, and Dickens imposed it in literature and philosophy by means of antithesis.
Descartes' cogito ergo sum, is the synthesis of a duality: mind and body.
In A Tale of Two Citites Dickens opens his novel with a detailed set of antheses:
It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way--
Although philosophers such as Hegel and Karl Marx attempted to discard the duality system by replacing it with a triad: thesis, antithesis, synthesis. They failed; and we can understand why: Hegel professed the State's power, while Marx communism. By now we know the chaotic results of Nazism and Communism.
The natural tendency is duality as proved by the Second Law of thermodynamics: order and chaos (enthropy). Though Nature tends to chaos, human nature imposes order; the mind invents patterns of understanding.
The Double entry Bookkeeping system is a triumph of the mind over the chaotic activities of humans engaged in trade. Not only did Double Entry brought forth a new economic system, but also the dawn of a new way of thinking: modernity. And modernity dispelled the mists of superstition, monsters, magic, witches, ogres, dwarfs, giants, miracles, chimeras, unicorns, centaurs, sirens, and other impossible figures of the supernatural.
The middle ages and feudalism yielded to modern times.
Luca Pacioli's legacy--accounting system--to the business world is order. It contains: Balance, wholeness, and radiance, because his system dovetails with Democracy, with Freedom to the entrepreneur; a system that coincides with Adam Smith's pillars of capitalism: Laissez-faire (free market economy), competition (Invisible Hand), and the Division of labor (the innate human propensity that creates wealth for all).
This is my fanfare to the common man, the humble monk--Luca Pacioli
Marciano Guerrero Retired Investment Banker, Corporate Controller, graduate of Columbia University, and Vietnam Vet (1967-1968). The writing techniques I use in writing stories and articles are all explained in: http://writerivetingprose.com
Article Source: http://EzineArticles.com/?expert=Marciano_Guerrero
Collections - When to Place Accounts For Collection
By Neil Murray
I once had a boss that taught me that the best time to mow the lawn was "just before it needs it". He said, "if you look out the window and say the grass needs to be cut, it's too late." The same is true in the world of accounts receivable management. The best time to place accounts for collection is "just before it needs it"!
Think about it, most of the time when we decide that it's time to take action it is because we called and the phone was disconnected, or we sent a statement or late notice and it was returned undeliverable. Granted, sometimes a company will close up just days after ordering, but that is really a rare occurrence.
A while back I was given the opportunity to say a few words at a sales meeting, so I proposed the "Johnnie Cochran method of identifying bad accounts". For those of you that don't remember Johnnie Cochran during the O.J. Simpson trial coined the phrase, "If the glove doesn't fit, you must acquit". Well, I suggested these two phrases: If the phone is disconnected, it won't get collected; and, If you have to skip trace it, it's just too late to place it. As you can imagine, that gained quite a few laughs. But the fact is, if the account is to that point, forget about it.
Now I am not saying that accounts with disconnected phone numbers never get collected. If we never collected accounts that had to be skip-traced, we would not be worth our salt as a collection agency. What I am saying is that companies that use that as a method of determining when to place, get a much lower collections return than companies that have a timeline that they follow most of the time.
Many experts in the field agree that a timeline for accounts receivable needs to be followed in order to maintain positive cash-flow. The exact timeline depends mostly on your terms. Suppose for a moment that your terms are the normal "net-30", the following might be a timeline that you would use:
Day -1 You ship your product, or provide service to your customer, and invoice them. They now have thirty days to pay, according to your agreed upon terms.
Day-30 If no payment has been received, call the customer and send a past-due notice.
Day-45 Another past-notice and a collection call. They need to know that you are watching your aging and that they are on the wrong side of it.
Day-60 A final call and a written demand for payment. This demand should inform them that all accounts over 60 days are subject to outside collection activity.
I should pause for a second here. Some of you will say, this account is not 60 days past due, it's only thirty. I have to disagree. The account is past-due the moment you ship or provide the service. It's a problem account until the day it is paid, and in many cases until the day the check clears your bank.
Day-75-80 A ten-day demand letter should be sent informing your customer that unless you hear from them in ten days, this account will go to collection. The key here is that when the deadline passes, you must take action! As I said before, when you make that call and get the "tones of death" (the number your are trying to reach has been disconnected.......) it's too late. Write it off to experience. Someone once said, "Experience is what you get, when you don't get what you wanted." Making that call is just like looking out the window and seeing that your grass is a foot high!
Remember:
If the phone is disconnected, it's not getting collected.
If you have to skip trace it, it's just too late to place it.
You can quote me on that!
Neil Murray is one of the founding partners at Hamilton & Monroe, LLC. Hamilton and Monroe is a full-service Commercial Collections Firm. We can be found on the web at http://www.hamiltonandmonroe.com or by calling (800) 313-9611. I can be reached by e-mail at neil@hamiltonandmonroe.com
Article Source: http://EzineArticles.com/?expert=Neil_Murray
I once had a boss that taught me that the best time to mow the lawn was "just before it needs it". He said, "if you look out the window and say the grass needs to be cut, it's too late." The same is true in the world of accounts receivable management. The best time to place accounts for collection is "just before it needs it"!
Think about it, most of the time when we decide that it's time to take action it is because we called and the phone was disconnected, or we sent a statement or late notice and it was returned undeliverable. Granted, sometimes a company will close up just days after ordering, but that is really a rare occurrence.
A while back I was given the opportunity to say a few words at a sales meeting, so I proposed the "Johnnie Cochran method of identifying bad accounts". For those of you that don't remember Johnnie Cochran during the O.J. Simpson trial coined the phrase, "If the glove doesn't fit, you must acquit". Well, I suggested these two phrases: If the phone is disconnected, it won't get collected; and, If you have to skip trace it, it's just too late to place it. As you can imagine, that gained quite a few laughs. But the fact is, if the account is to that point, forget about it.
Now I am not saying that accounts with disconnected phone numbers never get collected. If we never collected accounts that had to be skip-traced, we would not be worth our salt as a collection agency. What I am saying is that companies that use that as a method of determining when to place, get a much lower collections return than companies that have a timeline that they follow most of the time.
Many experts in the field agree that a timeline for accounts receivable needs to be followed in order to maintain positive cash-flow. The exact timeline depends mostly on your terms. Suppose for a moment that your terms are the normal "net-30", the following might be a timeline that you would use:
Day -1 You ship your product, or provide service to your customer, and invoice them. They now have thirty days to pay, according to your agreed upon terms.
Day-30 If no payment has been received, call the customer and send a past-due notice.
Day-45 Another past-notice and a collection call. They need to know that you are watching your aging and that they are on the wrong side of it.
Day-60 A final call and a written demand for payment. This demand should inform them that all accounts over 60 days are subject to outside collection activity.
I should pause for a second here. Some of you will say, this account is not 60 days past due, it's only thirty. I have to disagree. The account is past-due the moment you ship or provide the service. It's a problem account until the day it is paid, and in many cases until the day the check clears your bank.
Day-75-80 A ten-day demand letter should be sent informing your customer that unless you hear from them in ten days, this account will go to collection. The key here is that when the deadline passes, you must take action! As I said before, when you make that call and get the "tones of death" (the number your are trying to reach has been disconnected.......) it's too late. Write it off to experience. Someone once said, "Experience is what you get, when you don't get what you wanted." Making that call is just like looking out the window and seeing that your grass is a foot high!
Remember:
If the phone is disconnected, it's not getting collected.
If you have to skip trace it, it's just too late to place it.
You can quote me on that!
Neil Murray is one of the founding partners at Hamilton & Monroe, LLC. Hamilton and Monroe is a full-service Commercial Collections Firm. We can be found on the web at http://www.hamiltonandmonroe.com or by calling (800) 313-9611. I can be reached by e-mail at neil@hamiltonandmonroe.com
Article Source: http://EzineArticles.com/?expert=Neil_Murray
Manage Your Business With Small Business Accounting
By Alvis Brazma
Running a business enterprise has never been an easy task. We all know that it is definitely one of the most difficult things to execute and hence, it is very important that apt resources are used to run a business and that these resources are well monitored by a competent person, who is well versed with the various things that are required to run a business. The size of the business can never be a hindrance because each business has to start off one day and then travel through various ups and downs and then get to a stage that all business owners dream about their business. Among all the various divisions of a business, the division that definitely acts as the backbone of any business is the accounting department. Taking the help of small business accounting experts can definitely prove to be an intelligent move by any small business owner because that helps him in getting accurate professional help from people, who are expert in this domain of providing help for small business accounting.
There are many firms that provide small business accounting help to small business thus enabling them to get expertise solutions to all their accounting problems and they can be rest assured that they would get the best services. With the help of these services, any business owner, who is running a small business, can definitely breathe the air of relief because this enables them to get the accurate accounting details for their firms and the professionals, who take up the responsibility of this service, make sure that they provide the best services and help the firm that hires their services to get the best results in return. Therefore, taking the help of small business accounting from a firm that specializes in this field is definitely one of the best things that any business owner can do for their business.
As there are many firms that provide these services to small business and other similar kind of businesses, one definitely needs to make sure that they opt for the firm that can provide them with the best services and they would be able to yield beneficial results for the firm. For this, it is necessary that one conducts an accurate and extensive research work because only a thorough research can help in getting the apt firm whose services would aptly suit the needs of your business. Moreover, this will also help you to understand the various services that are provided by different small business accounting firms and you also get to know all about the new updates that are happening in this field.
Small business accounting for sure turns out to be one of the most favorable things for any small business owner because it is for sure that he or she would get accurate services for his or her accounting department. This becomes even more fruitful because as this is an outsourced program, the cost that is associated with it is much less when compared to the amount, which is paid to the in house staff working for a small business.
Alvis Brazma gives advice to business owners about how to manage their business efficiently without any hassles.To know more about Accounting help, accounting outsourcing,bookkeeping help, small business accounting visit this leading internet source: http://www.impacctusa.com
Article Source: http://EzineArticles.com/?expert=Alvis_Brazma
Running a business enterprise has never been an easy task. We all know that it is definitely one of the most difficult things to execute and hence, it is very important that apt resources are used to run a business and that these resources are well monitored by a competent person, who is well versed with the various things that are required to run a business. The size of the business can never be a hindrance because each business has to start off one day and then travel through various ups and downs and then get to a stage that all business owners dream about their business. Among all the various divisions of a business, the division that definitely acts as the backbone of any business is the accounting department. Taking the help of small business accounting experts can definitely prove to be an intelligent move by any small business owner because that helps him in getting accurate professional help from people, who are expert in this domain of providing help for small business accounting.
There are many firms that provide small business accounting help to small business thus enabling them to get expertise solutions to all their accounting problems and they can be rest assured that they would get the best services. With the help of these services, any business owner, who is running a small business, can definitely breathe the air of relief because this enables them to get the accurate accounting details for their firms and the professionals, who take up the responsibility of this service, make sure that they provide the best services and help the firm that hires their services to get the best results in return. Therefore, taking the help of small business accounting from a firm that specializes in this field is definitely one of the best things that any business owner can do for their business.
As there are many firms that provide these services to small business and other similar kind of businesses, one definitely needs to make sure that they opt for the firm that can provide them with the best services and they would be able to yield beneficial results for the firm. For this, it is necessary that one conducts an accurate and extensive research work because only a thorough research can help in getting the apt firm whose services would aptly suit the needs of your business. Moreover, this will also help you to understand the various services that are provided by different small business accounting firms and you also get to know all about the new updates that are happening in this field.
Small business accounting for sure turns out to be one of the most favorable things for any small business owner because it is for sure that he or she would get accurate services for his or her accounting department. This becomes even more fruitful because as this is an outsourced program, the cost that is associated with it is much less when compared to the amount, which is paid to the in house staff working for a small business.
Alvis Brazma gives advice to business owners about how to manage their business efficiently without any hassles.To know more about Accounting help, accounting outsourcing,bookkeeping help, small business accounting visit this leading internet source: http://www.impacctusa.com
Article Source: http://EzineArticles.com/?expert=Alvis_Brazma
Small Business Accounting Firm Ensures Accurate Numbers
By Alvis Brazma
When a business is established, the owner tries to fulfill all his dreams and aspirations in the form of this business. A business is not only an entity; it is a dream for many people and people, who are adamant of making their business a big name definitely need to do a lot of hard work and need to put in a lot of good things to materialize their dream. Any big firm was never a big firm. It has to start from starch and from there begins the journey that takes them through ups and downs but it is sheer determination that makes a small business turn into a big name in the industry.
Nature and size of two businesses can never be the same and keeping this in mind it is necessary that the accounting departments of all businesses fit the bill of the requirements. The accounting department of any firm is definitely the one department that has a lot to do in terms of performance and in terms of making the fate of the business organization. Keeping this thing in mind, this means that a small business organization would also need to have a competent accounting department in place. However, if this is not possible, then taking the help of a small business accounting firm that is completely competent in providing expert services to any small business firm is definitely an intelligent move by any business owner, who wants to fulfill all his dreams of seeing their organization in the limelight of the industry.
Taking the help of a small business accounting firm yields a lot of great results because the people, who work is these firms are CPAs and they know all the exact things that need to be done to take your business to the next level. These professionals, with their competence level and knowledge of the various aspects that are associated with the accounting department of any firm, make sure that all the accounts books in your firm are maintained properly and accurately. After all, accountancy is the game of numbers and if there is a slight mistake in any of the numbers, then it can lead to huge losses.
There are many firms that provide small business accounting help for small business firms. Therefore, it is mandatory for you as a business owner that you conduct a thorough research about all the firms that provide this service. This helps you in getting a firm whose services fit to the T with the nature and kind of your business. This also helps you in getting a deal that suits your budget. Moreover, the added advantage of outsourcing work is that it is less expensive when compared to the costs that are associated with in house employees.
Therefore, that you know from where and how you can take help of small business accounting firm, you will simply need to contact the firm that you decide to take help from. However, make sure that they are the best support. Moreover, just because you would be handing over the responsibility to some one else, it does not free you from keeping a track of the work. So do ensure that things are taken care of.
Alvis Brazma gives advice to business owners about how to manage their business efficiently without any hassles.To know more about Accounting help,bookkeeping help, small business accounting firm visit this leading internet source: http://www.impacctusa.com
Article Source: http://EzineArticles.com/?expert=Alvis_Brazma
When a business is established, the owner tries to fulfill all his dreams and aspirations in the form of this business. A business is not only an entity; it is a dream for many people and people, who are adamant of making their business a big name definitely need to do a lot of hard work and need to put in a lot of good things to materialize their dream. Any big firm was never a big firm. It has to start from starch and from there begins the journey that takes them through ups and downs but it is sheer determination that makes a small business turn into a big name in the industry.
Nature and size of two businesses can never be the same and keeping this in mind it is necessary that the accounting departments of all businesses fit the bill of the requirements. The accounting department of any firm is definitely the one department that has a lot to do in terms of performance and in terms of making the fate of the business organization. Keeping this thing in mind, this means that a small business organization would also need to have a competent accounting department in place. However, if this is not possible, then taking the help of a small business accounting firm that is completely competent in providing expert services to any small business firm is definitely an intelligent move by any business owner, who wants to fulfill all his dreams of seeing their organization in the limelight of the industry.
Taking the help of a small business accounting firm yields a lot of great results because the people, who work is these firms are CPAs and they know all the exact things that need to be done to take your business to the next level. These professionals, with their competence level and knowledge of the various aspects that are associated with the accounting department of any firm, make sure that all the accounts books in your firm are maintained properly and accurately. After all, accountancy is the game of numbers and if there is a slight mistake in any of the numbers, then it can lead to huge losses.
There are many firms that provide small business accounting help for small business firms. Therefore, it is mandatory for you as a business owner that you conduct a thorough research about all the firms that provide this service. This helps you in getting a firm whose services fit to the T with the nature and kind of your business. This also helps you in getting a deal that suits your budget. Moreover, the added advantage of outsourcing work is that it is less expensive when compared to the costs that are associated with in house employees.
Therefore, that you know from where and how you can take help of small business accounting firm, you will simply need to contact the firm that you decide to take help from. However, make sure that they are the best support. Moreover, just because you would be handing over the responsibility to some one else, it does not free you from keeping a track of the work. So do ensure that things are taken care of.
Alvis Brazma gives advice to business owners about how to manage their business efficiently without any hassles.To know more about Accounting help,bookkeeping help, small business accounting firm visit this leading internet source: http://www.impacctusa.com
Article Source: http://EzineArticles.com/?expert=Alvis_Brazma
Langganan:
Postingan (Atom)