Re: Fwd: Article on Accounting

["Chris Travers" <..hidden..>]

On Mon, Jun 2, 2008 at 1:52 AM, beamends <..hidden..> wrote:

>>
>> Nice article on accounting, a few of the list-readers could use it :P
>>
>> I'd post but the ledgersmb list doesn't like chinese ip's ...
>>
>> http://www.asifism.com/news-about-this-site-and-me/accounting-quickbooks-sage-peachtree-or-microsoft-office-accounting-part-one/
>>
>
> Unfortunately the author makes the same mistake as so many do - failing
> to separate day-to-day operation of the business from accounty type
> things (depreciation) which are only visited a few times a year.
> The after asking round a bit, it seems the vast majority of small
> businesses (>3 employees) have no computer system at all, pay a
> book-keeper to enter things (they don't know, or care, what into),
> and see their accountant about twice a year (end-of-year and when the
> but a "new" van or such). They have no interest in accounting whatsoever
> (after all, they pay their accountant to do that, just like they pay the
> garage to service the van - they neither know nor care how the van works
> as long as it does).

Most of the small business owners I know only want to know enough
accounting to ensure everything is in order (this means learning the
basics and no more).  So this would probably be in line with your
observations.

I thought the mistake was a deeper one than that-- not understanding
what accounting is well enough to understand why that separation was
impossible (blaming accountants and governments when there is an
inherent issue).  My view is that accounting is a branch of applied
mathematics which is designed to provide financial information about
an economic entity, and so, no matter how much you automate common
things, you still need a manual interace so that you can ensure that
the information is accurate

BTW, depreciation is one of those things we are looking at automating
down the road, but it also highlights this problem:  there are many
ways of handling depreciation and they are appropriate for different
envionments (straight-line, sum of years, per unit of production,
etc), and may even be appropriate for different parts of a business
(in a factory, depreciate many of the machines per unit produced,
depreciate the office furniture using a straight-line method, etc).
If you don't discuss the matter with an accountant how do you know you
are choosing the best option for your business?

Similarly, even as we intend to automate most typical adjustments
eventually, we will never get them all.  Hence the accounting
interface could get less use, but it still needs to be there.\

However it still made an interesting read, so I figured I would pass it along.

Best Wishes,
Chris Travers