Archive for September, 2008
Saturday, September 27th, 2008
Accounting Double Entry
Accounting involves the classification, analysis and dissemination of financial information to those parties who require such information in order to make informed judgments and decisions based on the material.
It is the measurement and control of financial transactions which are, in essence, the transfer of legal property rights, between one party and another, made under binding arrangements. However, transactions that are not financial in nature are specifically excluded since they are regarded as not material.
The double-entry bookkeeping system used in accountancy is the linchpin used by businesses and organisations to record all of their financial transactions. The concept was first introduced in 1494 by the Italian mathematician Luca Pacioli.
It is based on the proposition that a measure of a business’s financial well being and a record of the results of its operations are best recorded by the use of accounts.
Accordingly, each account records an historical log of the changes in the monetary values relating to different aspects of the business. The method originally enunciated by Pacioli is now called double-entry bookkeeping.
The basis for this system is, quite simply, that each transaction is recorded in at least two accounts. It is established upon the supposition that for each financial transaction, there is at least one account being debited whilst, at the same time, at least one other account is being credited. The result of this process is that the total debits of the transaction are equal to the total credits so that the overall net value is zero.
Consider the following scenario. Suppose Mr A sells an article to Mr B, who then pays Mr A by means of a cheque. The bookkeeper working on behalf of Mr A would credit the account called “Sales” and debit the account called “Bank Read the rest of this entry »
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Friday, September 26th, 2008
He finally had to close his doors, not because of the economy, but rather due to the accounting and management issues. Specifically, he had over a long period of time built up his business from scratch. He made furniture as works of art, beautiful stuff and had developed quite a reputation for himself. In fact, he did not even have a showroom, he simply set up on the main road outside of town and folks stopped by to purchase his hand made furniture and told their friends.
Eventually, the city expanded and then disallowed road-side sales, so he went and got a retail space in the old revitalized section of town. Unfortunately, he was selling so much furniture that he could not be in the showroom all the time, rather, he had to be in the workshop, something that only he could do, due to the artistic talent needed.
The center in “old town” was very nice, but expensive and he had to sell more and more to pay for the triple-net lease, and things were moving well, but that meant he was forced to produce more and more inventory, but this meant he could never be one with his customer as before. He hired a sales staff to work the stores mandatory hours; 10AM to 7PM, as per his lease agreement.
He had trouble finding the right people and they often sold the furniture too cheap or failed to give customers cash receipts. He eventually had to close the store, even though it was making money, even though he had so much demand he could hardly keep up. All due to cash flow, management and mostly due to accounting problems, unable to see where he was; he had no snap-shot of his financial situation. Thus, he could not get a loan, move his business to the next step or capitalize on all the goodwill, he had created over the years. Think on this.
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Thursday, September 25th, 2008
Accurate financial records are essential to all companies, big and small. It takes a meticulous bookkeeper to maintain the financial records. That is the reason why big companies have their own bookkeepers who essentially does the task of sustaining the financial data of the business. Other companies, on the other hand, prefer to just get a freelance bookkeeper so they can concentrate on product development and other enterprising concerns.
Small businesses who cannot afford the services of a full-time bookkeeper would rather get a bookkeeper working freelance who would likewise cater their every financial need. Getting a freelance bookkeeper is more practical for these small companies since transactions are not on a daily basis. It relieves them from the cost of hiring another employee especially for businesses that are just beginning to grow but still meet the job of organizing and maintaining their financial records. A freelance bookkeeper does the job well and complies with the standards of the entrepreneur and the company as well.
If you are having second thoughts about hiring a bookkeeper outside your internal system, you may want to look into the following advantages of getting one:
- Getting a freelance personnel is less costly than hiring your own bookkeeper. An additional employee means an added overhead expense for salaries, allowances, insurance, holidays and sick leaves. All you need to pay is the bookkeeper’s hourly rate. There would be no added cost for office supplies, equipment, and other utilities as well.
- Contracting a freelance bookkeeper who would organize their financial records frees the company from hiring and training a new employee since these bookkeepers are already trained, either on their own or through a bookkeeping firm.
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