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Financial Accounting Vs Managerial Accounting - Difference between financial and Managerial Accounting

Financial accounting reports are prepared for the use of external parties such as shareholders and creditors, whereas managerial accounting reports are prepared for managers inside the organization.

This contrast in basic orientation results in a number of major differences between financial and managerial accounting, even though both financial and managerial accounting often rely on the same underlying financial data. In addition to the to the differences in who the reports are prepared for, financial and managerial accounting also differ in their emphasis between the past and the future, in the type of data provided to users, and in several other ways. These differences are discussed in the following paragraphs.
Emphasis on the Future:

Since planning is such an important part of the manager's job, managerial accounting has a strong future orientation. In contrast, financial accounting primarily provides summaries of past financial transactions. These summaries may be useful in planning, but only to a point. The future is not simply a reflection of what has happened in the past. Changes are constantly taking place in economic conditions, and so on. All of these changes demand that the manager's planning be based in large part on estimates of what will happen rather than on summaries of what has already happened.
Relevance of Data:

Financial accounting data are expected to be objective and verifiable. However, for internal use the manager wants information that is relevant even if it is not completely objective or verifiable. By relevant, we mean appropriate for the problem at hand. For example, it is difficult to verify estimated sales volumes for a proposed new store at good Vibrations, Inc., but this is exactly the type of information that is most useful to managers in their decision making. The managerial accounting information system should be flexible enough to provide whatever data are relevant for a particular decision.
Less Emphasis on Precision:

Timeliness is often more important than precision to managers. If a decision must be made, a manager would rather have a good estimate now than wait a week for a more precise answer. A decision involving tens of millions of dollars does not have to be based on estimates that are precise down to the penny, or even to the dollar. In fact, one authoritative source recommends that, "as a general rule, no one needs more than three significant digits., this means, for example, that if a company's sales are in the hundreds of millions of dollars, than nothing on an income statement needs to be more accurate than the nearest million dollars. Estimates that accurate to the nearest million dollars may be precise enough to make a good decision. Since precision is costly in terms of both time and resources, managerial accounting places less emphasis on precision than does financial accounting. In addition, managerial accounting places considerable weight on non monitory data, for example, information about customer satisfaction is tremendous importance even though it would be difficult to express such data in monitory form.
Segments of an Organization:

Financial accounting is primarily concerned with reporting for the company as a whole. By contrast, managerial accounting forces much more on the parts, or segments, of a company. These segments may be product lines, sales territories divisions, departments, or any other categorizations of the company's activities that management finds useful. Financial accounting does require breakdowns of revenues and cost by major segments in external reports, but this is secondary emphasis. In managerial accounting segment reporting is the primary emphasis.
Generally Accepted Accounting Principles (GAAP):

Financial accounting statements prepared for external users must be prepared in accordance with generally accepted accounting principles (GAAP). External users must have some assurance that the reports have been prepared in accordance with some common set of ground rules. These common ground rules enhance comparability and help reduce fraud and misrepresentations, but they do not necessarily lead to the type of reports that would be most useful in internal decision making. For example, GAAP requires that land be stated at its historical cost on financial reports. However if, management is considering moving a store to a new location and then selling the land the store currently sits on, management would like to know the current market value of the land, a vital piece of information that is ignored under generally accepted accounting principles (GAAP).
Managerial AccountingNot Mandatory:

Financial accounting is mandatory; that is, it must be done. Various out side parties such as Securities and exchange commission (SEC) and the tax authorities require periodic financial statements. Managerial accounting, on the other hand, is not mandatory. A company is completely free to do as much or as little as it wishes . No regularity bodies or other outside agencies specify what is to be done, for that matter, weather anything is to be done at all. Since managerial accounting is completely optional, the important question is always, "Is the information useful?" rather than, "Is the information required?"

History of Managerial Accounting

Managerial accounting has its roots in the industrial revolution of the 19th century. During this early period, most firms were tightly controlled by a few owner-managers who borrowed based on personal relationships and their personal assets.
ince there were no external shareholders and little unsecured debt, there was little need for elaborate financial reports. In contrast, managerial accounting was relatively sophisticated and provided the essential information needed to manage the early large scale production of textile, steel, and other products. After the turn of the century, financial accounting requirements burgeoned because of new pressures placed on companies by capital markets, creditors, regulatory bodies, and federal taxation of income. Johnson and Kaplan state that "many firms needed to raise funds from increasingly widespread and detached suppliers of capital. To tap these vast reservoirs of outside capital, firms' managers had to supply audited financial reports. And because outside suppliers of capital relied on audited financial statements, independent accountants had a keen interest in establishing well defined procedures for corporate financial reporting. The inventory costing procedure adopted by public accountants after the turn of the century had a profound effect on management accounting. As a consequence, for many decades, management accountants increasingly focused their efforts on ensuring that financial accounting requirements were met and financial reports were released on time. The practice of management accounting stagnated. In the early part of the century, as product line expanded operations became more complex, forward looking companies saw a renewed need for management-oriented reports that was separate from financial reports. But in most companies, management accounting practices up through the mid-1980s were largely indistinguishable from practices that were common prior to world war I. In recent years, however, new economic forces have led to many important innovations in management accounting. These new practices are discussed in other chapters.

Need for Managerial Accounting Information

Need for Managerial Accounting Information

Every organization-large and small-has managers. Someone must be responsible for making plans, organizing resources, directing personnel, and controlling operations. Every where mangers carry out three major activities-planning, directing and motivating, and controlling.

Planning:

Planning involves selecting a course of action and specifying how the action will be implemented. The first step in planning is to identify the alternatives and then to select from among the alternatives the one that does the best job of furthering the organization's objectives. While making choices management must balance the opportunity against the demands made on the companies resources.

The plans of management are often expressed formally in budgets, and the term budgeting is applied to generally describe the planning process. Budgets are usually prepared under the direction of controller, who is the manager in charge of the accounting department. Typically, budgets are prepared annually and represent management's plans in specific, quantitative terms.
Directing and Motivating:

In addition to planning for the future, managers must oversee day-to-day activities and keep the organization functioning smoothly. This requires the ability to motivate and affectively direct people. Managers assign tasks to employees, arbitrate disputes, answer questions, solve on-the-spot problems, and make many small decisions that affect customers and employees. In effect, directing is that part of the manager's work that deals with the routine and the here and now. Managerial accounting data, such as daily sales reports are often used in this type of day-to-day decision making.
Controlling:

In carrying out the control function, managers seek to ensure that the plan is being followed. Feedback, which signals operations are on track, is the key to effective control. In sophisticated organizations, this feedback is provided by detailed reports of various types. One of these reports, which compares budgeted to actual results, is called a performance report. Performance report suggest where operations are not proceeding as planned and where some parts of the organization may require additional attention.
The Planning and Control Cycle:

The work of management can be summarized in a model. The model, which depicts the planning and control cycle, illustrates the smooth flow of management activities from planning through directing and motivating, controlling, and then back to planning again. all of these activities involve decision making. So it is depicted as the hub around which the activities revolve.

Accounting For Management

Introduction to Managerial Accounting (Cost or Management Accounting)

What is Managerial Accounting (Management Accounting / Cost Accounting)?

Managerial accounting is concerned with providing information to managers-that is, people inside an organization who direct and control its operation. In contrast, financial accounting is concerned with providing information to stockholders, creditors, and others who are outside an organization.

Managerial accounting provides the essential data with which the organizations are actually run. Managerial accounting is also termed as management accounting or cost accounting. Financial accounting provides the scorecard by which a company's overall past performance is judged by outsiders. Managerial accountants prepare a variety of reports. Some reports focus on how well managers or business units have performed-comparing actual results to plans and to benchmarks. Some reports provide timely, frequent updates on key indicators such as orders received, order backlog, capacity utilization, and sales. Other analytical reports are prepared as needed to investigate specific problems such as a decline in the profitability of a product line. And yet other reports analyze a developing business situation or opportunity. In contrast, financial accounting is oriented toward producing a limited set of specific prescribed annual and quarterly financial statements in accordance with Generally Accepted Accounting Principles (GAAP). (Ray H. Garrison, Eric W. Noreen 1999).


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Financial accounting vs. Managerial accounting:

Managerial accounting differs from financial accounting in a number of ways that are briefly discussed below. Click here for a detailed study of the difference between financial and managerial accounting.

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Deferred Revenue Accounting

D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E 23 DETC OCCASIONAL PAPER
Deferred
Revenue
Accounting
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
DETC OCCASIONAL PAPER
NUMBER 23
Deferred Revenue Accounting
by
Mr. Walter Miller, CPA, Director of Finance, College of the
Humanities and Sciences Harrison Middleton University
Published by the Distance Education and Training Council
1601 18th Street, NW, Washington, D.C.20009
202-234-5100; fax: 202-332-1386; www.detc.org
July 2005
DETC OCCASIONAL PAPERS are essays intended to stimulate and encourage
candid exchanges of ideas between distance study professionals. For a complete set
of Occasional Papers, write or call the DETC.
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
1
Introduction
The Accreditation Standards of the DETC require that an institution be
financially able to deliver high quality instruction and educational
services.1 When evaluating this standard, the Accrediting Commission
uses comparative financial statements from the institution prepared
using the accrual method of accounting in conformity with generally
accepted accounting principles. One specific area evaluated in the Self-
Evaluation Report (SER) is the reserves kept for honoring future service
obligations, bad debts, and refunds.2
Reserves
When dealing with reserves, financial statements presented according to
generally accepted accounting principles (GAAP), and demonstrated
operations, you encounter several elements that need to be addressed.
These elements have a financial statement impact and, for those schools
which are for-profit, an income tax impact. These elements are:
• Reserve for bad debts – this is an estimated amount of the school’s
accounts receivable (usually tuition) that will not be received in the
future.
• Actual bad debts – these are the actual accounts receivable that the
school has determined will not be paid and have no further remedies
that will or can be pursued for collection.
• Reserve for unearned income – this represents the amount of tuition
the student has paid or signed a contract for which the school has
not earned the right to keep.
• Refund reserve – this represents the obligation the school has to
repay money received from a student calculated on the DETC
minimum standards.
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
2
• Reserve for future services – this represents an estimate of the cost
to provide services the school is contractually obligated to perform
based on tuition that has been received and is not subject to refund.
• Accrual of tuition income – this represents services that have been
provided to students but have not been paid by the students.
• Accrual of expenses – this represents expenses that have been
incurred for services to students where the expenses have not been
paid.
In order to demonstrate that it has a sound and financially responsible
operation, an institution accredited by the DETC must adequately
address each of the items above.
Reserve Treatment
A typical accounting transaction for tuition could follow two basic
paths:
1. A student enrolls and pays the full tuition in full (“up front”) for the
course or program.
2. A student enrolls and enters into a contractual agreement to pay the
tuition over a period of time, usually several months. There is
usually a down payment required and interest is charged on the
outstanding balance owed.
The accounting treatment for the first pattern would be to record the
receipt of cash as an asset and the balancing entry would be to “reserve
for unearned income,” a liability account. As lessons/courses are
submitted for school servicing, income from services would be recorded
by reducing the reserve for unearned income and increasing income.
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
3
When the entire course has been completed, i.e., when the last required
assignment has been submitted to the school by the student, all the
tuition would be included in income and the associated liability would
be zero. Using this method would provide an adequate reserve/liability
for refunds required under the DETC Accreditation Standards, and no
reserve for future services would be required.
Balance Sheet: An Illustration
Assets
Cash $1,000
Liabilities
Reserve for unearned income $1,000
First lesson completed -100
All lessons completed -900
0
Income Statement
Tuition income First lesson completed 100
Tuition income All lessons completed 900
1,000
The reserve for unearned revenue may also be eliminated by the
expiration of the contract. The use of a fixed contractual term for each
student enrollment is allowed by DETC standards. This contractual
term must be of sufficient duration to allow a typical student to
complete the course/program within that period. Institutions should be
able to prove that a clear majority of students complete the course/
program well within any term period. The expiration of the contract
term would allow the school to include in income all tuition that had
been received and eliminate any related reserve for unearned income on
that contract. As the expiration of the contract terminates the obligation
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
4
for future services to the student, no liability would need to be recorder
for future services.
Under the second pattern, the school would record the down payment as
an increase in the asset – cash, the tuition receivable as an asset (if the
period the receivable is payable over more than twelve months, it would
be split between a current and a long term asset), and an off-setting
liability – reserve for unearned income. The income recognition would
follow the first pattern with a supplemental evaluation of the
collectibility of the tuition receivable.
The collectibiltiy of receivables must be reviewed periodically. This
evaluation would result in the establishment of a reserve for bad debts.
The offset to the reserve for bad debts is a bad debt expense on the
income statement. This reserve can be established based on historical
analysis of collectibility of accounts and/or actual analysis of the
existing receivables. As any tuition receivable is deemed to be
uncollectable, the amount should be written off. To write off tuition
receivables, the school would reduce the accounts receivable asset and
reduce the allowance for bad debts. This may also require an adjustment
to the reserve for unearned income. If the income related to the
receivable had not been included in income, then the offset to the
receivable would involve the reduction of the reserve for unearned
income.
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
5
Balance Sheet
Assets
Cash $100
Payment on accounts receivable 100
Payment on accounts receivable 500
$700
Accounts receivable 900
Payment on accounts receivable -100
Payment on accounts receivable -500
$300
Reserve for bad debts -300
Liabilities
Reserve for unearned income 1,000
First lesson completed -100
All lessons completed -900
0
Income Statement
Tuition income First lesson completed 100
Tuition income All lessons completed 900
1,000
Bad debts -300
Net income $700
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
6
Alternative Reserve Treatment
Some schools may record the entire tuition as income when received or
when a contract is signed. Schools using this approach would be
required to establish reserves for refunds and reserves for future service
obligations. The reserve for refunds should be calculated based on the
DETC minimum tuition refund policies for all existing students. This
requires an analysis of the number of courses/lessons completed to
determine the school’s financial obligation to the students. When the
refund reserve is established, income would be reduced by the same
amount.
Even though the school does not have an obligation to refund tuition, it
may have an obligation to provide services to the student. This
obligation—reserve for future services—should reflect the anticipated
cost to provide the educational elements to the student. This reserve
creates a liability on the balance sheet and an expense on the income
statement.
If the school uses a reasonably and justifiable fixed contract term, both
of the above reserves would be reduced to zero at the end of the term
contract period.
Use of the alternative reserve method should be done with caution, as a
standard accounting principle is to match income and expense to the
period in which the income is earned. If a school’s contractual
obligation with a student is greater than twelve months, the alternative
method could overstate current period income. For example, a student
enrolls in a four year bachelors degree program for $20,000. The
student completes half of the program by the end of year two, and
pursuant to DETC guidelines, is no longer entitled to a refund. The
school would take $10,000 into income in that year (the amount that
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
7
was previously treated as a refund reserve), and set up a reserve for
future services to offset that income. This net of the two items would be
the net income for that student’s remaining involvement with the
school. Then, for the next two years allotted to the provisions of
services, the school would show no income or expense. For illustration,
assume the amount for future services is $5,000 and there are 100
students in that situation. The school in year two would include
$500,000 ($10,000 – 5,000 = $5,000; $5,000 * 100 = $500,000) in net
income for year two and nothing in years three and four.
In today’s tumultuous accounting environment, schools should use
conservative accounting practices in dealing with income recognition
and reserves.
Income Tax Issues
Unfortunately for for-profit schools, the tax treatment of income and
reserves is significantly different than the financial statement treatment.
The Internal Revenue Code requires the inclusion in income of any cash
received that does not have a contractual obligation to be repaid. The
Code also does not allow the deduction of reserves from income. It only
allows the deduction of actual incurred expenses. In the example at the
end of the last section, the tax result would be taxable income of
$1,000,000 ($10,000 per student no longer required to be repaid times
100 students).
Summary
DETC’s continued stature as a “nationally recognized” accrediting
association hinges on its accredited institutions maintaining a high level
of financial responsibility, and running a sound and ethical operation.
The proper and conservative handling of reserves has a significant
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
8
impact on demonstrating the school’s ability to be financially able to
deliver high quality instruction and educational services.
Notes
Accounting standards and the tax laws are constantly changing. The
information included in this DETC Occasional Paper is for general
guidance only, and is based on DETC standards, accounting standards,
and tax laws in effect on May 31, 2005. Each institution should consult
its own qualified legal, accounting, and tax professionals for guidance
in their unique situations.
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
9
Appendix 1
Footnote 1: (Accreditation Standard X)
X. FINANCIAL RESPONSIBILITY (The institution is financially able
to deliver high quality instruction and educational services.)
A. Financial Practices
The institution shows, by complete, comparative financial statements
covering its two most recent fiscal years, that it is financially responsible
and that it can meet its financial obligations to provide instruction and
service to its students. (Financial statements must be prepared “in
conformity with generally accepted accounting principles.”)
B. Demonstrated Operation
In all respects, all institutions must document continuous sound and ethical
operations. Applicant institutions must document two* continuous years of
sound and ethical operation as a bona fide electronically-delivered, online
or other delivery method of distance study (*one year if the parent
company is accredited by another accrediting agency that is recognized by
either the U.S. Department of Education or the Council for Higher
Education Accreditation). This documentation shall show that the name
being used by the school is free from any association with activity that
could damage the standing of the accrediting process, such as illegal
actions, unethical conduct, or abuse of consumers.
Footnote 2:
IX.A. 6. Describe what reserves are kept for honoring future service
obligations, bad debts, and refunds.
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
10
Appendix 2
Under DETC’s D.1. - Examiner’s Rating Form for All Institutions, under Standard
IX. Financial Responsibilities, you should be able to answer “Yes” to the following
questions.
IX. A. Financial Practices
1. Do the institution’s financial statements demonstrate overall financial
responsibility or does the parent company guarantee financial stability?
a. Are the financial statements complete?
b. Are all notes and supplementary schedules to statements included?
c. Do the statements include an income statement, balance sheet, statement
of cash flows, and explanatory notes?
d. Did the institution provide detailed operating statements for institution
divisions?
e. Are the statements prepared using the accrual method of accounting?
2. Did the institution submit a properly executed copy of the appropriate Teach-
Out Commitment form?
3. Does the institution use an adequate budget-making process?
4. Are current assets sufficient to meet current liabilities?
5. Did the institution answer “No” to the question, “Has the institution ever
entered into bankruptcy?”
6. Are the reserves for honoring future obligations, bad debts accurate, and
refunds adequate?
7. Do the accounts payable (numbers, amounts, and age) reflect sound financial
responsibility and management?
8. Are inventories of course materials adequate for current and future servicing
requirements?
9. Does the institution have adequate insurance coverage, and is it properly
allocated?
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
11
10.For an institution with resident training program(s), is there adequate liability
coverage for students at resident training sites?
IX. B. Demonstrated Operation
1. Has the institution documented at least two continuous years* of experience as
a distance education institution (with the period starting with the date of the
first enrollment)? (*one year if the institution or its parent is accredited by
another recognized accrediting agency.)
2. Has the institution (or parent company) demonstrated sound financial
responsibility and ethical operation for the preceding two years?
3. Has the institution presented the proper documentation proving it is approved
or licensed as appropriate?
4. Has the institution documented that the name being used by the institution is
free from any association with activity that could damage the standing of the
accrediting process?
5. Does the institution offer instruction that is predominately at a distance?
6. Degree Program(s): Can the institution document that it has a completely
developed curriculum with at least one academic degree program in which
students have been enrolled for a minimum of two years (one year if parent
company is accredited by another recognized accrediting agency)?
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
12
Appendix 3
H.2. Policy on Commission-Requested Financial Statements
When the Accrediting Commission requests a financial statement from an
accredited or applicant institution, the financial statement must be prepared “in
conformity with generally accepted accounting principles,” often referred to as
“GAAP.” This includes the use of accrual method of accounting. The Commission
has the option of requesting one of these two types of financial statements:
1. An audited financial statement certified by an outside, independent, certified
public accountant in accordance with standards established by the American
Institute of Certified Public Accountants.
2. A reviewed financial statement. A “reviewed financial statement” consists of
inquiries of institution management by an outside, independent, certified
public accountant and includes analytical procedures applied to financial data.
It is less in scope than an audited statement and does not have an “opinion”
regarding the financial statements. The accountant must, however, state that he
or she is not aware of any material modifications that would need to be made
to the statements in order for them to be in conformity with standards
established by the American Institute of Certified Public Accountants.
All financial statements should cover the activities of the legal entity that has the
responsibility for operating the accredited distance education institution.
Minimum Acceptable Financial Statements
At a minimum, the financial statements (audited or reviewed) must be comprised
of:
A. A Comparative Statement, which displays the most recent two fiscal years of
financial data, preferably in side-by-side columns.
B. Balance Sheet, reflecting assets, liabilities, equity, and retained earnings;
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
13
December 30, 2005
Mr. Michael P. Lambert, Executive Director
Distance Education and Training Council
1601 18th Street, NW
Washington, DC 20009
Dear Mr. Lambert:
As a certifying officer, I acknowledge my responsibilities for establishing and
maintaining controls and procedures that ensure that I am aware of material
information relating to [name of institution]. The attached report discloses (a) all
material weaknesses in internal controls that came to the attention of certifying
officers, (b) any fraud involving management or employees with significant
responsibilities, and (c) any significant changes in internal controls, including
actions to correct material weaknesses, during the period covered by this report.
C. Income Statement, reflecting revenues, expenses, and profits and losses;
D. Statement of Cash Flows, reflecting the sources and uses of working capital;
and
E. Explanatory Notes, which reflect all of the disclosures or footnotes required
by generally accepted accounting principles.
These statements must be as of the date of the institution’s most recently ended
fiscal year or a date otherwise specified by the Accrediting Commission.
Letter of Financial Statement Validation
This letter must accompany an institution’s financial statements when submitted as
an exhibit with a Self-Evaluation Report, or anytime when the Accrediting
Commission calls for a financial statement from an institution, or when an
institution’s Annual Report submission requires a financial statement (e.g., when
there’s a loss is reported).
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
14
I have reviewed this report. Based on my knowledge:
(1) This report contains all the facts needed to prevent it from being misleading
and it contains no untrue statements;
(2) Financial statements and other information fairly present the financial
condition, results of operations and cash flow.
Certified by:
Chief Executive Officer: _____________________________________
Chief Financial
Officer:________________________________________
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
Other Occasional Papers Available
Number 1—Student Services: Achilles Heel or Crown Jewel? by
Michael P. Lambert, Executive Director, DETC
Number 2—What Manager Doesn’t Study at Home? by Dr. Gordon
Wills, Principal, The International Management Centres
Number 3—Toward Better Service and Testing by Dennis Foltz,
Vice President of Education and Operations, Gemological Institute
of America
Number 4—Testing Home Study Advertising by Jack Thompson,
Consultant
Number 5—Conducting Graduate Surveys by Mary McKeown,
Vice President, American School
Number 6—Enrollment Contracts for Home Study Schools by
William Wright, American School
Number 7—Evaluating Your School’s Worth by Michael P. Lambert,
Executive Director, DETC
Number 8—Getting the Most PR for Your School by Sally R.
Welch, Assistant Director, DETC
Number 9—The Effectiveness of the Home Study Method edited by
Sally R. Welch, Assistant Director, DETC
15
DETCOCCASIONALPAPERTWENTYTHREE
16
Number 10—Home Study Academic Transcripts by Sally R.
Welch, Assistant Director, DETC
Number 11—Admissions Policies: The Key to Success by
Josephine L. Ferguson, Member, DETC Accrediting Commission
Number 12—How to Write an Analytical Self-Evaluation Report
by Josephine L. Ferguson, Member, Accrediting Commission of
the DETC
Number 13—Building a Distance Education Faculty by Dr. John
E. Jessup, Academic Dean, American Military University
Number 14—Embracing the Internet by Carol Oliver and Dr.
Gordon Wills, International Management Centres
Number 15—Strategies for Helping Students Transfer Credits by
Ali Fares, Cleveland Institute of Electronics
Number 16—How to Develop a Plan of Succession by Robert
McKim Norris, Jr., Andrew Jackson University
Number 17—How to Assess Experiential Learning by Lisa J.
Davis, California College for Health Sciences
Number 18—Managing Education Programs in the Information
Age by Tina J. Parscal, ISIM University
Number 19—Converting Courses to Online by Dr. Judith M.
Smith, SiteTrainer.com.
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
Number 20—Confessions of an Early Internet Educator by Jack
R. Goetz, Concord University School of Law
Number 21—Global Activities of DETC Institutions by Irving H.
Buchen, IMPAC University
Number 22—International Academic Equivalence: A Primer by
Irving H. Buchen, IMPAC University and David John Le Cornu,
St. Clements University
D E T C O C C A S I O N A L P A P E R T W E N T Y T H R E E
1601 18TH STREET, N.W.
WASHINGTON, D.C. 20009-2529
(202) 234-5100
http://www.detc.org
E-Mail: detc@detc.org
DISTANCE EDUCATION AND TRAINING COUNCIL

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their business off to a proper start
our program expands on and
reinforces the lessons they learn in
new dealer training.
Franchise Business Systems offers
a complete package of services
and support for Amoco Dealers.
To assist new Dealers in getting
their business off to a proper start
our program expands on and
reinforces the lessons they learn in
new dealer training.
Your Logo
Here
(800) 382-1040
Services
Offered
Monthly Accounting Service
Payroll Service
Tax Preparation & Planning
Business Plan Development
Pre Purchase Evaluation
Buyer Due Diligence Reviews
Retail Inventory Set-up
Merchandising Assistance
Incentive Plan Development
Audit Representation
Monthly Accounting
Service Reports
Profit & Loss Statement
Balance Sheet
Departmental Sales, Cost of Sales & Gross
Margin Report
Departmental Shrinkage Report
Gasoline Sales Graph
Gross Profit By Department Graph
W.A.M. ( Pool Margin) Report
Bank Reconciliation
Reconciliation of Daily Books & Daily Sales
Analysis Report
Reconciliation of Accounts Payable, Accounts
Receivable & Petty Cash
Complete Transaction Detail Reporting
Sales Tax Preparation
Quarterly Payroll Tax Returns
Monthly Accounting
Service Also
Includes
Free Custom Daily Books (Paper Books)
Free Daily Book Software & Support
Training on Completion of Daily Books
Training & Support for Retail Inventory System
Assistance With M.I.R. & D.I.R. When Necessary
Programming Ruby For Categories &
Departments
Support For All Sales Tax Questions
Support For All Payroll Tax & Personnel
Questions
Business Tax Planning
Assistance With Financing & Bank Paperwork
1 Hour per Month Business Consulting
Our basic monthly accounting standard fee is
$350.00 per month and covers the complete
monthly accounting service.
Amoco Dealers receive a 15% discount off our
standard fee when referred by an S.O.M. To
receive the discount, billing must be handled by
EFT.
Monthly Accounting
Service Setup
There is a one time setup fee for
all new Amoco monthly
accounting service clients of
$250.00
This fee covers the following
services.
Assistance with Amoco business plan
Pre closing meetings or telephone consultations
Review of purchase and asset allocations
Attendance at and assistance with closing
Conversion of retail inventory to cost for
purchase
Programming of Ruby categories and reports
Initial training on daily books
Setup of accounting system
Sample Financial Statements
For
Retail Petroleum Dealers









Sample Daily Books Recap
For
Retail Petroleum Dealers







Payroll Services
Free set-up
Free checks
Free basic maintenance
Free new employee set-up
Free rehires
Free departmentalization
Fast payroll turnaround
We handle all payroll tax deposits
Personal service
Direct Deposit Available
Ready-to-sign Quarterly Tax Returns
We prepare reconciled W-2’s
Payroll Service
Fees
Number of Fee per Pay Period
Employees Weekly Bi-Weekly Monthly
1 17.00 22.00 32.00
2 18.00 23.00 33.00
3 19.00 24.00 34.00
4 20.00 25.00 35.00
5 21.00 26.00 36.00
6 22.00 27.00 37.00
7 23.00 28.00 38.00
8 24.00 29.00 39.00
9 25.00 30.00 40.00
10 26.00 31.00 41.00
11 26.75 31.75 41.75
12 27.50 32.50 42.50
13 28.25 33.25 43.25
14 29.00 34.00 44.00
15 29.75 34.75 45.75
16 30.50 35.50 46.50
17 31.25 36.25 47.25
18 32.00 37.00 48.00
19 32.75 37.75 48.75
20 33.50 38.50 49.50
Custom quotes available for 21 or more
Fee of $5.00 per W-2 (minimum $10.00) at
year end. Delivery/Postage at Cost
Tax Services
Our tax department provides complete tax
preparation, tax planning, and audit
representation services.
Because we specialize in helping retail
petroleum , we keep up on all the latest tax
matters that affect their business. We know
what the IRS is looking for when they audit
retail petroleum dealers, so we can help them
avoid the tax traps that exist in their industry
We can help dealers comply with the complex
sales tax rules for C-Store and Bay
Operators.
Our year round tax planning, will help
make sure you pay the lowest tax the law
allows.
We can help you take advantage of the new
Work Opportunity Tax Credit.
Sample Business Plan
For
Dealer School


New Dealer
Setup Outline
First Meeting or Consultation
Prospective Dealer Consultation
1) Review accounting needs and services available
2) Review choice of business entity
3) Supply prospective dealer with industry standards
4) Review areas of due dilligence
Second Meeting or Consultation
Dealer Approved By Amoco (Pre dealer school)
1) Complete accounting services agreement
2) Assist with completion of Amoco business plan
3) Assist with due diligence as requested
Pre Closing Meeting or Consultation
1) Complete sales tax application
2) Complete application for temporary alcohol and
tobacco license
3) Complete DBA paperwork
4) Setup payroll service & payroll information
New Dealer
Setup Outline
At Closing
1) Assist with inventory calculations
2) Program Ruby categories and reports
3) Provide shift report forms
4) Provide payroll setup for new employees
5) Review store layout and procedures with new
dealer.
5 Days After Closing
1) Train new dealer on completion of daily books
2) Assist as necessary with accounting and accounting
procedures
3) Obtain copies of closing statements and purchase documents
7-10 Days After End of First Month
1) Contact new dealer for monthly work
15th-19th Day After Month End
1) Sales tax sent to dealer
25-30 After End Month Work Received
1) Financial statements sent to dealer
Closing
Check List
10 Days Before Closing
____ Review sellers sales tax records for
successor liabilities
____ Arrange for closing inventory to be taken
____ Apply for sales tax number
____ Apply for alcohol and tobacco licenses
____ Obtain copies of sellers commercial personal
property tax returns
____ Apply for DBA as Amoco…
____ Set allocation of purchase price for assets, goodwill
and non-compete with seller
____ Arrange for transfer of existing phone number with
seller
1 Day Before Closing
____ Transfer funds for closing to your attorney’s trust
account (any excess funds will be returned at closing)
____ Purchase change bank for opening
____ Be sure transfer letters will be provided for pay
phones, and other vending income sources
Day of Closing
____ Check inventory to be purchased for out of date items
or items that are not in sellable condition

Online Accounting Courses

Online Courses in Accounting and Finance

Online courses, training, and diploma programs in accounting, and finance. Topics include: financial accounting, financial statements, financial planning, estate planning, tax preparation, QuickBooks, and more.
Online Accounting Courses

Accountants are responsible for the financial accounting and auditing activities of a business, such as overseeing the books, payroll, tax compliance, and the like. If you're great with numbers and a disciplined self-starter, then this lucrative career path is right for you.
What You'll Learn in Online Accounting Courses
You'll study all aspects of accounting in online accounting courses, including auditing, cost accounting, and individual and corporate taxation. You'll also hone your ability to work with accounting information systems. Accounting is a four-year degree or more if you choose the CPA path. However, accelerated and flexible study programs are available online. Also, short term, one or two-year online accounting courses prepare you for a para-professional accounting position, assisting in auditing and tax preparation.
Bright Prospects for Your Accounting Career
The combination of new federal accounting and auditing laws with increased degree requirements that effectively add an additional year to the CPA have created a dearth of accountants. As a result, accountants were the most in-demand of all college grads in 2005. Beginning accountants with Bachelor's Degrees in Accounting received starting salaries averaging $44,564, according to the National Association of Colleges and Employers. Experienced corporate auditors are pulling down from $70-$85,000 on average. Regardless of your position, expect to work overtime during tax season if you choose accounting as your career.

Why Study Accounting

For those who don't know, Accounting is the language of business and is needed now more than ever before. It is the backbone of all businesses and therefore is a very broad subject. Today, there are more CEOs with degrees in accounting than any other area of study. College students that are unsure which area of business they would like to study should seriously consider accounting. Career opportunities associated with a degree in accounting are practically endless due to how broad the subject is. Job opportunities include public accounting, government, private industry and forensic accounting. There are also opportunities in tax preparation, cost management and even jobs with the FBI. Accounting opportunities are not limited to the ones named above.

Another reason college students should consider studying accounting is the condition of the economy. Due to the recession that our economy is going through, many industries are cutting down on jobs. One area of business that is still thriving is accounting. Various businesses are realizing how important it is to cut down on costs to make their business more profitable during this time of economic crisis. They also realize how important it is to have strict set of internal controls to make their business more efficient. The only way to ensure that both of these can happen is through stringent accounting. After reading this it should be no surprise that accounting jobs may be on the rise.

According to the American Institute of Certified Public Accountants, 91% of accounting firms expect hiring to increase or at least remain the same. This is great news for college graduates who are seeking a career in accounting. So many college students have been worried that they may not have a job when they graduate due to today's economic crisis. With a steady rise in unemployment it is comforting to see that there is still a high demand for accountants.

Job opportunities are not the only reason that college students should consider accounting. The job can be very rewarding as well. The average salary for accountants as of March 9, 2009 is $51,000. This salary can change based on company, location and industry.

Internal controls are important for a business to control internal theft. Without a good set of internal controls it would be too easy for employees to steal cash or even merchandise. An important aspect of internal controls that is important is separation of duties. This means that no one person performs all the jobs of a company. This ensures that one person checks someone else's work making it difficult to fabricate accounting data to steal money from the company. Accounting provides a basis for these controls and checks to see if they are being enforced.

With accounting frauds becoming more and more of a problem there is more of a demand for people with accounting knowledge in the FBI. They need people who are able to decipher financial statements and pick out bad accounting form in order to uncover sophisticated accounting frauds. Accountants are also needed during trial to provide lawyers and prosecutors with testimonial evidence. It can be a very exciting and rewarding area of accounting. Many accountants feel rewarded by uncovering and prosecuting those who try to profit from manipulating financial data. With more and more accounting frauds being committed each year, there is more of a need for strict audits by accounting firms. This means more business for accounting firms and ultimately more jobs for accountants.

If you are a college student searching for a major it would seem wise to pursue a degree in accounting. The opportunities that this degree can provide for you may be endless. You may find yourself working for a large accounting firm or even owning your own private, small scale CPA Firm. You may also become a CEO or a CFO of just about any company being that accounting is the backbone of business. It is safe to say you can't go wrong with a degree in accounting.



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financial accounting standards

financial accounting standards
Professional View
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Building a better person

the job market in relation to fresh graduates.
Monday, May 03, 2010
Building a better person
We often think about schooling as simply getting good exam results; maybe at best, we regard it as a way to practice our intellectual skills. But schools are where the adults of tomorrow learn not just how to read and write, but how to live. Our schools do a good job of teaching us basic literacy (and arguably quite a poor job of helping us think about the things we read and write), but even our best schools are often only mediocre when it comes to preparing us for life outside academia.

A friend of mine, Lim Su Ann, wrote an excellent post some months back on how deeply unsatisfying the opportunities for extracurricular growth are in our schools — it's a piece I recommend highly. Most of us in school simply go through the motions of extracurricular involvement — we don't really care about what we do. Most of the extracurricular things I pursued in school had nothing to do with my school. Until our schools allow students the freedom to pursue the things which interest them outside the classroom, and encourage responsible decisionmaking instead of simply usurping all of students' autonomy, we can't say our schools are properly preparing the adults of tomorrow.

Why Study Accounting and Finance?

Why Study Accounting and Finance?

Accountants record, classify, summarise, interpret and communicate the financial information about a business. However they do more than just prepare financial reports on the activities of an organisation. Experienced accountants work strategically with the executive and management teams by providing expert financial advice on the impacts of management decisions, compliance and governance and the deployment of systems, resources and processes throughout the company. At Macquarie, students learn to apply accounting skills to a range of different managerial, business and problem-solving situations.

According to the Australian Government Australian Careers website, average weekly earnings for accountants are 20% higher than the all occupations average wage* and job prospects are very good. Property and business services industry, finance and insurance companies, and Government Departments were the biggest employers.

Depending on the program selected, accounting also provides training for a wide range of vocations including:

* Auditing
* Merchant banking
* Government accounting
* Public practice
* Investment management
* Service industries
* Manufacturing
* Stockbroking
* Management consulting
* Taxation

Finance concerns the commercial activity of providing funds and capital. It studies the ways in which individuals, businesses and organizations raise, allocate and use monetary resources over time, and addresses the problems of risk and liquidity inherent in the projects. It is concerned with decision making within financial and capital markets and the financial instruments that are traded in those markets and looks at how these interactions facilitate the flow of funds and the control of risk. Finance deals with financing and investment decisions and considers the the development of risk-hedging strategies so as to minimise the damaging effects of adverse movements in share prices, interest rates, exchange rates, and other uncertainties.

According to the Australian Government Australian Careers website, average weekly earnings for financial managers are 39% higher than the all occupations average wage* and job prospects are very good. Property and business services industry, finance and insurance companies, and Government Departments were the biggest employers.

Depending on the program selected, Finance provides training for a wide range of vocations including:

* financial managers
* bank and insurance managers
* multinational funds managers
* investment analysts
* financial researchers in stockbroking firms, banks and government departments
* corporate financial managers or treasurers
* security and derivatives traders
* portfolio managers for trust funds, superannuation funds and insurance companies
* investment analysts in stock exchange markets
* management consultants
* corporate advisors in merchant banks, public accounting firms, and management consulting firms.

*These figures cannot be used in determining a particular wage rate or as an indication of what a person will earn in that job

Oxford Diploma in Financial Strategy

"An understanding of financial strategy is critical for anyone seeking the most senior and rewarding careers in finance. The Oxford Diploma in Financial Strategy will challenge and deepen your knowledge, and offer the competitive advantage of an MBA."

Kathy Harvey, Director, Diploma Programmes

The University of Oxford Diploma in Financial Strategy is a prestigious postgraduate qualification for senior finance professionals. It is an opportunity to broaden and enhance skills while gaining an Oxford qualification.

The programme comprises of the finance and strategy components from Oxford’s Executive MBA to further advance professional qualifications and experience. Participants learn to apply expert skills in strategic management, finance and management control systems. Each module is taught over four days in January, April, June and September allowing participants to study alongside employment, and complete the programme in one year.

The Diploma is rigorous and intellectually challenging. It attracts participants from all over the world, and provides world-class teaching, analysis and exchange of ideas in a global context.

The Oxford Diploma in Financial Strategy:

* Builds on qualifications and experience of senior accounting and finance professionals
* Four intensive short modules of intensive teaching from Oxford professors
* Learn to apply expert skills in strategic management, finance and management control systems
* Gain a Masters level qualification from the University of Oxford

International Accounting Standard

IAS 1
Presentation of Financial Statements
Issued in September 1997:
Replaced IAS1 (January 1975), IAS 5 (October 1976), IAS 13 (November 1979)
Revised in September 2007

Complete set of financial statements

(1) statement of financial position
--> at the end of period

(2) statement of comprehensive income
--> for the period

(3) statement of changes in equity
--> for the period

(4) statement of cash flows
--> for the period

(5) statement of financial position
--> at the beginning of
--> earliest comparative period

(6) notes, a summary of significant accounting policies

Accrual basis of accounting
--> is used in preparing financial statements

--> except for the statement of cash flows

Comparative information
--> (in respect of the previous period)

--> is required for all amounts
--> reported in the current period's
--> financial statements

Consistency of presentation and classification
--> (from one period to the next)
--> is required

Statement of comprehensive income
--> can be presented in (1) or (2)

(1) in a single statement of comprehensive income
(2) in two statements:
(2a) separate income statement
--> for profit or loss
(2b) separate statement of comprehensive income
--> for other comprehensive income

Accountancy courses qualifications

So, what is a rewarding career? A career with a high salary? A career which has a respected position in society? A career with mobility and excellent prospects?

The accounting profession offers all of these opportunities, as well as a challenging and varied work environment. Accountancy is essentially the effective management and administration of the financial affairs, and accountants are a vital part of any organisation's operations.

As a qualified accountant, you have the opportunity to pursue a variety of finance careers in any of the world's financial centres and in any business sector. Accountants are employed in the public or private sector, industry or commerce, and across the whole spectrum of financial work; from audit and public practice; to management or financial accounting; in taxation related work: or in management consultancy and financial services. Accountants are often perceived as boring 'number crunchers', but the variety of career opportunities open to the qualified accountant highlights this as a misconception.

With accountancy you have the luxury of career mobility; the freedom to choose your own career path and the opportunity to gain the knowledge and skills required to rise to the top in your chosen field. To benefit from career mobility you must acquire the skills that employers want. Employers want quality personnel, professional, flexible and adaptable employers. How do you acquire these skills?

To become qualified accountant in the UK and in other countries around the world the generally accepted route is to join a professional accountancy body and to pass the professional examinations. In addition to this, bodies also require their graduates to satisfy stipulated work experience to gain full membership and qualification.

Taking the UK as an example, the accountancy profession is unregulated except for certain areas, which are regulated by law. These three areas are; investment advice, insolvency work and company audit work. Individuals wishing to practise as an auditor in the UK are required by law to hold an audit qualification from a Recognised Qualifying Body (RQB) there are five RQB's: Association of International Accountants, Institute of Chartered Accountants in England and Wales; Institute of Chartered Accountants of Scotland, Institute of Chartered Accountant in Ireland; Association of Chartered Certified Accountants.

The majority of students pursuing a career in accountancy opt to study a degree prior to their professional examinations.

Most professional bodies operate a policy of exemptions designed to reduce repetition for students who have already attained a qualification of an acceptable standard. For students holding degrees, this means that they are often rewarded exemptions from the whole or part of the first level of a professional qualification, effectively reducing the time scale for qualification.

What's the Recommended Type of Bookkeeping System and Accounting Method ?

Most accountants when asked will recommend that a business use the double entry bookkeeping system and the accrual basis or method of accounting which is based on the revenue realization principle and a principle called the matching concept. The revenue realization principle states that revenue should be recorded when actually earned.

Don't tell me accountants actually play matchmakers or promote a dating service! No the matching principle is recording the revenues earned during a period using the revenue realization principle and matching (offsetting) the revenues with the expenses incurred in generating this revenue. Why is this so important ? All businesses small and large need information to determine how well or badly they are performing; however, if this information is misleading it could lead to false conclusions and unnecessary actions. Show me what you mean.

The following sample business transactions for a mowing and landscaping company will be used to illustrate the accrual basis of accounting/matching concept and the cash basis of accounting.

January xxxx Billed $30,000 To Customers For Services Performed & Completed In January XXXX
January xxxx Received Payments From Customers of $15,000
January xxxx Billed $12,000 by Outside Contractors For Services Performed & Completed In January XXXX
January xxxx Paid Outside Contractors $8,000

February xxxx Received Payments From Customers of $15,000
February xxxx Paid Outside Contractors $4,000

Accounting Methods

Another decision faced by a new business is what accounting/bookkeeping method is going to be used to track revenues and expenses. An accounting method is just a set of rules used to determine when and how income and expenses are reported.

If inventories are a major part of a business, the decision is made for the business owner by the Internal Revenue Service (IRS). Some business will be required to use the accrual method of accounting while others may be granted an exception and allowed to use the cash basis along with some special rules.

You're more than likely to encounter both the term method and basis used when this topic is discussed. In some cases you'll see the term cash method used and other cases see the term cash basis used. Likewise you'll see the term accrual method used and the term accrual basis used. They both refer to the same concept and are used interchangeably.

* Cash Method
The cash method or basis of accounting recognizes revenues (earnings) in the period the cash is received and expenses in the period when the cash payments are made. Actually, two types of cash methods (basis) of accounting exist:

o strict cash method (basis)
o modified cash method (basis)

A strict cash method follows the cash flow exactly. A modified cash method includes some elements from the accrual method of accounting and provides special methods for handling items such as inventory and cost of goods sold, payroll tax expenses and liabilities, and recording and depreciating property and equipment.

Many small businesses, whether they know it or not, are actually using a modified cash method.

By concentrating on recording revenues and expenses, the purpose of the cash or modified cash method of accounting is on determining the net income or loss for a period based on the cash received and the cash spent.

Information, such as the amounts billed to customers for products and/or services and not paid, and the amounts billed by suppliers for their products and/or services and not paid is not normally recorded and maintained in the "books" using the cash method.

Many small businesses start out using the cash basis rather than the accrual basis of accounting.

Use of the cash basis generally is not considered to be in conformity with generally accepted accounting principles (GAAP). Is this necessarily bad ? No, if no need is foreseen for what are called audited financial statements there's no need for concern. In most cases, audited statements are only required for the "big boys" (companies whose ownership interests are publicly traded). The "little guys" like the ma and pa shops don't need to worry. Still, when possible, a business should strongly consider using the accrual method of accounting.

* Accrual Method
The accrual method or basis of accounting records income in the period earned and records expenses and capital expenditures such as buildings, land, equipment, and vehicles in the period incurred.

The purpose of the accrual method of accounting is to properly match income and expenses in the correct period.

In order to accomplish this, the accrual method of accounting records revenue as earned when the product and/or service is shipped or rendered and invoiced (billed) to customers. Likewise, expenses and capital expenditures are recorded as incurred when the product and or service is shipped or rendered and invoiced (billed) by the supplier.

Information, such as the amounts billed to customers for products and/or services and not paid, and the amounts billed by suppliers for their products and/or services and not paid is recorded and maintained in the "books" using the accrual method. This is the accounting method that is required to be used in order to conform to generally accepted accounting principles (GAAP) in preparing financial statements for external users.

Difference Between The Two Methods
The difference between the two methods used for recording revenues and expenses results from when the business transaction is recorded in the "books" (timing). A business using the accrual method will record revenues and expenses in their "books" before a business using the cash method. In other words, unlike the cash method, they don't wait until they get paid by the customer or wait until they pay a supplier to record the transaction.

Comment: I've heard that "forewarned is fore armed" so here goes. Cash Flow and Profits are two different "animals". Due to the timing difference as to when revenue and expenses are recorded and when the cash resulting from the revenue and expenses is actually received or paid out , a business using the accrual method of accounting and reporting a "hefty" profit does not necessarily mean that they have the cash to pay their bills.

Even though the accrual method provides a better measure of profit and loss, many small businesses still use the cash basis of accounting. I think with the advent of easier to use computer accounting and bookkeeping software, we'll see more businesses adopting the accrual basis of accounting.

Relationship Between the Type of Bookkeeping System Used and the Accounting Method Used
What if any is the relationship between the type of bookkeeping system used and the method of accounting ?

The Single Entry bookkeeping system is used along with the Cash Method of accounting.
Debits and Credits are not used to record financial events.

The Double Entry bookkeeping system can be used with both the Cash and Accrual methods of accounting.
Debits and Credits are used to record financial events.

So You Know
You can use a different accounting method, the cash method or the accrual method, for each business that you set up.

Also, you can keep two sets of books, one on the cash basis and the other on the accrual basis, for the same business. You do; however, have to select one of the methods for tax purposes and continue to use it in the future. This is perfectly legal. It's when you keep two sets of books to hide your true earnings when the trouble begins.

Accounting and Bookkeeping Software
Let's muddy the water about the single and double entry accounting method at least as to how it relates to using bookkeeping and accounting software.

Single or Double Entry ?
Accounting and bookkeeping software programs actually allow the user to make a single (one) entry and the software handles creating the debit and credit entries "behind the scenes". The double-entry system is still there, but it's hidden from the user. The one exception is the general journal where the user does enter debits and credits.

Let's look at a sample transaction of invoicing (billing) a customer to illustrate what I'm talking about.. An invoice to a customer is created and printed and the resulting transaction is automatically recorded in the "books" as an increase to the amounts owed by customers and an increase to revenues (sales) using debits and credits.

Wow, since it's automatic, does that mean we don't need to learn about debits and credits later ? Only in your dreams. Although an airplane can be flown on auto-pilot, would you want to be on that plane without a trained pilot ? The same applies to using accounting and bookkeeping software. You need a properly trained bookkeeper or accountant that is also familiar with the software product in order to properly use the software. That ole saying "GIGO" (Garbage In - Garbage Out) definitely applies here.

Let's also muddy the water regarding the cash method and accrual method of accounting.
Some accounting software allows you to convert data back and forth between a cash basis and accrual basis of accounting. As I stated earlier, you do have to select one of the methods for tax purposes and continue to use it in the future.

Bookkeeping

Hello my name is Dave and yes I'm a bean counter. No I didn't say alcoholic, that's a soft drink not a beer in my hand, and this is not a meeting of Alcoholics Anonymous. For those of you that don't know a bean counter is slang sometimes used to refer to a bookkeeper. I've searched the web for good free bookkeeping and accounting tutorials and came to the conclusion that they're hard to find so this is my attempt to try and fill the void. What qualifies me to attempt this task ? I guess you can tell it's not my fancy dress code. I have over 30 years experience in business and even taught at a small business college for a couple of years. My method of passing on knowledge is to make the subject easy to understand and to use simple examples and terminology to illustrate the concepts being presented. If you're anything like me I learn a lot easier when I can see an example of what we're talking about. Tell me and show me too.

This free bookkeeping tutorial is geared to business owners, managers, and individuals who have not had any formal bookkeeping training or on the job experience and need or want to learn the basics of bookkeeping. In other words, this tutorial is for beginners (newbies) or those needing a quick refresher and is only an introduction into the world of accounting. They say a little knowledge is a dangerous thing. Well my goal is to make you dangerous.

Tutorial Navigation
A menu of all the lessons is presented at the top and bottom of all the lessons. A back and next arrow also allow you to go back to the prior lesson or on to the next lesson. In addition, some Lessons contain Interactive Tables, Forms, and Lists. These sections include Navigation Instructions. The Lessons also include Links to additional learning materials and quizzes.

# Additional Needs My bookkeeping and accounting quizzes and games require Adobe's Free Macromedia Flash Player which is normally already installed on your computer.
Get Adobe's Free Flash Player.
# My Skill Tests require Javascript to be enabled in your browser. Most computers also already have this feature enabled.

What's Covered ?

This Introduction discusses the types of business organizations, types of business activities, users of financial information, bookkeeping systems, accounting rules, and the cash and accrual basis of accounting.

Lesson 1 The Bookkeeping Language introduces you to some of the terminology and definitions used in the accounting and bookkeeping language.

Lesson 2 Property and Property Rights explains Property & Property Rights, the Accounting Equation, double entry bookkeeping, and how business transactions affect the equation.

Lesson 3 Debits and Credits introduces and explains Debits and Credits and how they affect the Accounting Equation and are used to record business transactions.

Lesson 4 Recording Business Transactions explains and uses examples to illustrate how business transactions are properly analyzed, recorded, and summarized.

Lesson 5 The General Ledger and Journals explains what General Ledger and Journals are, how they're used, and what bookkeeping purposes they serve.

Lesson 6 Financial Statements explains what financial statements are, how they're created, and how they're used.

Lesson 7 Review of Major Concepts reviews the major definitions, concepts, and bookkeeping records previously discussed and necessary for an understanding of bookkeeping.

Introduction

Why Learn Bookkeeping ?
Why would you want to learn bookkeeping and keep up to date financial records anyway ? Can't you hire an accountant to come after the end of the year and get your check book and shoe box and do your taxes ? Sure you can ! And yes you will have adequately fulfilled your taxpayer obligations. But in order to run a business and know what, where, and when to take corrective actions requires business information. How do you get and where do you find this information ? You don't if you don't keep accurate and current records about your business financial activities (bookkeeping).

Users of Financial Information
Who needs financial information about a business besides the owner(s) ?

Users can be grouped into two broad categories namely internal users and external users. Internal users are the managers and the owners and employees who actually work for the business. External users include lenders and other creditors (suppliers), investors, customers, and governmental regulatory and taxing agencies.

Why do they need financial information ?
Users need this information to make knowledgeable decisions. Lenders and other creditors want to make sure that they will be paid back for the credit that they have extended to a business. Even lenders that offer alternatives to small business loans like credit card factoring, more commonly known as business cash advances, will need this information because they will base their funding decisions on your credit card receivables history. By analyzing financial information, they at least have something to base their lending or credit decision on. The days of the "friendly" banker are gone. You need to provide them with financial information as a basis for their loan decisions. A "good ole boy" handshake won't cut it now. Similarly, customers want to make sure that the business they're buying products or services from is going to be around and not be in such a poor financial position as to have to close its doors. Other users have their own reasons for using this financial information.

Since users require financial information to base their decisions on, let's determine what is required to fill this need.

Let's begin with a definition for accounting.
Accounting is the art of analyzing, recording, summarizing, reporting, reviewing, and interpreting financial information.

Let's also define what bookkeeping is and is not. I hate to admit this but I'm going to tell a true story about myself in high school. I thought I was fairly smart back in my high school days and took all the college prep classes. My high school offered bookkeeping classes but I had no clue as to what that course was about. I thought bookkeeping was a course on how to properly organize and stack the reading books in the proper place and shelves in the library using that Dewey decimal code. That is keeping the books isn't it ? Well kinda, but that's not the bookkeeping you're going to learn here. Bookkeeping is one of the components of accounting. Think of accounting as the mom and bookkeeping as one of her children.

Bookkeeping is the process of recording and classifying business financial transactions (activities). In simple language-maintaining the records of the financial activities of a business or an individual. Bookkeeping's objective is simply to record and summarize financial transactions into a usable form that provides financial information about a business or an individual.

Accountants normally plan and set up the accounting and bookkeeping system for a business and turn over the day to day record keeping to the owner or one of his/her employees. In this age of computers, more and more of the daily bookkeeping is being done using bookkeeping software and computers although some businesses still maintain manual records. Due to the reasonable cost of computers and software, I recommend an automated (computer) bookkeeping system. Visit my site for some recommended software. In order to illustrate and understand what is actually being recorded and summarized by a computer bookkeeping system (behind the scenes) my lessons will illustrate the manual method of recording a company's financial information.

Learn the Fundamentals of Accounting

Understanding the basics of accounting can make the difference between success and failure in so many different areas of life. Financial reports, balance sheets, reconciling bank statements--and the ability to create, interpret and implement them--are all tools we can't afford to ignore.

roll today! This is a self-paced, online course. You have 6 months to finish. An instructor will monitor your progress and assess your body of work at course completion.

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WHAT IS ACCOUNTING?

Quite simply, accounting is a language: a language that provides information about the financial position of an organization. When you study accounting you are essentially learning this specialized language. By learning this language you can communicate and understand the financial operations of any and all types of organizations.



This is because the information required by most organizations is very similar and can be broken down into three main categories:

ACCOUNTING INTRODUCTION



Operating Information

This is the information that is needed on a day-to-day basis in order for the organization to conduct its business. Employees need to get paid, sales need to be tracked, the amounts owed to other organizations or individuals need to be tracked, the amount of money the organization has needs to be monitored, the amounts that customers owe the organization need to be checked, any inventory needs to be accounted for: the list goes on and on. Operating information is what constitutes the greatest amount of accounting information and it provides the basis for the other two types of accounting information.



Financial Accounting Information

This is the information that is used by managers, shareholders, banks, creditors, the government, the public, etc… to make decisions involving the organization and its operations. Shareholders want information about what their investment is worth and whether they should buy or sell shares, bankers and other creditors want to know whether the organization has an ability to pay back money lent, managers want to know how the company is doing compared to other companies. This type of information would be very difficult to extract if every company used a different system for recording their financial position. Financial accounting information is subject to a set of ground rules that dictate how the information is reported and this ensures uniformity.



Managerial Accounting Information

In order for the managers of a company to make the best decisions for a company they need to have specific information prepared. They use this information for three main management functions: planning, implementation and control. Financial information is used to set budgets, analyze different options on a cost basis, modify plans as the need arises, and control and monitor the work that is being done.



As you can see, accounting is a multifaceted system involving different people with different needs and after analyzing the various uses and applications of accounting information the American Accounting Association has come up with this definition: “the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information.”



In order to facilitate the informed use of this financial information, accounting has come to be based on specified rules or conventions called “principles.” These principles provide general laws or rules that are used to guide accounting activity and are called Generally Accepted Accounting Principles, or GAAP for short. These principles are established by the Financial Accounting Standards Board (FASB) which is a nongovernmental agency funded by the accounting profession and contributions from business organizations. While there is no legal obligation for companies to adhere to GAAP, there are strong practical reasons to do so. From auditing to reporting earning to the US Securities Exchange Commission to applying for a loan, there are very compelling reasons for organizations to conform to the generally accepted standard.



What Is The End Result Of All This Accounting Information? We’ve talked about the reason for maintaining accounting information and the end result of all of this recording is the preparation of financial statements. These statements let people see, at a glance, the financial position of an organization. These statements provide summaries of the operating information and are used extensively by people within and external to the company. The statements fall into one of two categories:

*

Status/Stock – these statements show the financial status of an organization at one specified instant in time. Stock reports = a snapshot.
*

Flow Report – these statements show the flow of financial information over a period of time. Flow reports = motion picture

GAAP requires the preparation of three different statements:



Balance Sheet

A Balance Sheet is a status report that shows information about the organization’s resources at one given time. Examples of information found on a balance sheet are how much cash is in the bank, what is owed to creditors, and the value of the company’s assets.



Income Statement

An Income Statement (also called a Statement of Earnings, Statement of Operations, or a Profit and Loss Statement) is a report that shows the flow of revenues (amounts earned from business activity) and expenses (amounts paid in the course of operations) over a given period of time, typically a month, quarter, or year.



Statement of Cash Flow

As the name suggests, this is also a flow statement that details the movement of cash through the organization over a specified period.



The whole purpose of accounting is to provide information that is useful and relevant for interested parities when making decisions regarding the company and its operations. In order to do that effectively, a specific language and subsequent rules have been developed for users of the information. By learning accounting you learn these rules and can then communicate financial information with others in a comprehensible and comparable manner.

Columbia Southern University

When there isn't enough of you to go around, yet you understand the importance of earning your degree...
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CSU's programs were designed for those of us who must juggle career and family, along with our own professional educational needs, without jeopardizing what we already have.

At CSU, you'll earn your degree while you earn a living. You will earn your degree on your schedule in the comfort of your home or office at times that are convenient to you, without sacrificing the main benefit of classroom instruction - the Professor.

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The select members of our faculty are not academicians steeped in theory alone. In addition to having earned their degrees from such prestigious universities as Duke University, the University of Notre Dame, Purdue, and Penn State, CSU's faculty are recognized leaders within their chosen professions and bring to our programs a wealth of "real world" experience that will prove beneficial to you as you progress through your studies here at CSU.

Worried about returning to school after all of these years?
Dont be. You will find yourself in good company. Few of our students are eighteen or twenty years old. Most are twenty-nine, or thirty-five, or forty-seven years old with two or three kids, and a dog and a cat just like you. But, just to put your mind at ease, the first course you will complete is CSUs Student Orientation that serves to ease you back into your studies.

Personalized Service
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Transfer Credits
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Don't be. You will find everything you need to complete assignments and more at CSU Online Library. Real-time reference assistance is provided 24/7 by professional librarians. Here you will find online tutorials, program resources, articles, government resources, etc that will prove valuable to you.

University & Learning Partners
Columbia Southern University is proud to be associated with the following Universities and Learning Partners: UWA, UNA, UWF and Delta Air Lines to name a few.
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"I have already secured a new position since earning my Bachelor Degree that increased my salary by $15,000. Thanks CSU."
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Start class when you are ready, with CSU's Per Course Enrollment. There are no predetermined semester or session dates you need to contend with. You may indicate a desired course start date up to two-weeks in advance (four-weeks allowed for APO) or you may choose to begin your course(s) as quickly as possible.
Accelerated Degree Program

You set the pace. With CSU’s per course enrollment system, students are given ten weeks to finish each course. However, students can complete courses in less time if they are able to do so. And you can choose to complete one course at a time, or complete several at the same time--students are entitled to choose w hat suits them best.