Mostafa
Friday, November 23, 2007
LAPPING
Today we have trick using by enormous in Accounting Career and the most awful thing is that Accountants whom they didn't have ethics
is the one we are talking about now ..
any way the trick is LAPPING...the name is kinda of confusing ! What does the name mean ?
simply in the big firms or corporations we have deals with other Clients. Some of it in cash and others on credit
So the Lapping Commence here when Cash sales occurred regardless to Career Ethics .
as usual the firm will handle the sales through an Accountant(Financial Accountant) So his role with this Account to record and Classify
every deal with Clients and Customers ..
Generally Most of Customers or Clients don't deal in Cash manner Hence they try with the credit one ...
Furthermore that The Customer who deal in Cash is Acceptedly Had Paid but the Accountant who handle this transaction Do other thing
he record this transaction as credit not cash .. now you figure that there is amount of money is out of records and already paid
beside this the creditors is increasable which influence on profitability
Once the Accountant get the money he involve in personal business Using it ..
before this LAPPING Discovered he repay the amount he had stolen .
So The way to figure this trick is the internal control and Continuous Stocktaking on Cash and the records
Best Hopes,
Mostafa
WHO WAS THE FIRST ACCOUNTANT?
Pacioli - The Father of Accounting
Luca Pacioli (1447-1517), the wandering Franciscan monk and mathematician, was a contemporary of Columbus and a friend and collaborator of Leonardo da Vinci. His seminal work, Summa de Arithmetica, Geometrica,Propotioni et Proportionalite, published in 1494, contained a section, "Particularis de Computis et Scripturis" (Details of Accounting and Recording) that described "the system used in Venice". This was four decades after the Gutenberg invention of movable type and printing centers all over Europe allowed Pacioli's Summa to be translated, printed, and spread across the continent.
Pacioli's Summa is the first known complete description of double entry bookkeeping. Three books were to be used: memorandum book, journal, and ledger. Journal entry postings from the memorandum book required debits on the left and credits on the right. Although many currencies existed, Summa required that all entries be translated to a single monetary unit. A trial balance was necessary when the books were closed. The balances from the profit and loss account were entered in the capital account. In other words, Summa described a system remarkably like modern bookkeeping. The Summa was translated into Dutch, German, French, Russian, and English and Pacioli's system spread across Europe. For this reason Pacioli is the "Father of Accounting". Relatively little progress was made beyond Pacioli's Summa for several generations. In fact, it is difficult to identify pioneering accountants before the Industrial Revolution.
From Renaissance Italy to Industrial England
Pacioli's Summa was published not long after Columbus' return from the New World, a key event in the decline of Italian states and the rise of Spain as a world power. First Spain and Portugal and then Holland and England became great sea powers. England gradually gained the upper hand, through trade and imperialism under the Mercantilist theory that colonies provide raw materials and buy finished goods. Industry was based on a crafts system, with wealth based largely on land and merchandising. Thus, except for the vast colonial base, the system was similar to Renaissance Italy.
An important capitalist invention was the joint stock company, precursor to the modern corporation. One of the first in England was the East India Company, chartered in 1600, with monopoly rights between Cape of Good Hope and the Straits of Magellan. During the early years only short-term stock was issued for single voyages, then the stock liquidated and the proceeds divided among shareholders (permanent capital was first raised in 1657). One potential "first accountant" would have been Thomas Stevens, the first Accountant General for East India Company (to 1614). Unfortunately, no surviving accounting records exist before 1657.
Joint stock companies fell into disfavor with the bursting of the South Sea Bubble of 1720 (due to large scale fraud and speculation). Charles Snell may be the "first auditor" for his financial reviews after the South Sea Bubble, but accounting innovation had to wait for English entrepreneurs of the 18th century. Joint stock companies regained their popularity early in the 19th century.
The Industrial Revolution dramatically increased per capita production through mechanization. Eighteenth century England was changed from an agrarian and craft-based society to an industrial power. Cotton textiles were manufactured first, based on Kay's flying shuttle (1733), Hargreave's spinning jenny (1765), Arkwright's water frame (1769), and so on. Perhaps the most significant invention was James Watt's steam engine in 1769. Steam power made modern factories possible.
Each inventor was an entrepreneur with a need for capital and a vision, usually to generate vast personal wealth. A banking system and adequate transportation were necessary components. Banking began in England from goldsmiths safekeeping customer gold and silver and then lending the metals. Customers were given receipts which they used to pay their bills. The Bank of England, chartered as a Joint Stock Company in 1694, became the first central bank. Canal building began in the late 18th century, followed by locomotives from about 1830. With mass transportation the acquisition of large quantities of raw materials and the distribution of finished products over large distances became possible.
The rise in productivity in Britain was dramatic, over 2% a year in gross national product (GNP). In 1750 per capita production was similar around the world. According to Kennedy [1987], if British productivity was 100 in 1750, then that of the Third World was 70 and the rest of Europe was 80. By 1900 British productivity was 1,000. By 1860 Britain produced more than half the world's iron and coal, was responsible for 20% of world trade and 40% of manufacturing trade.
find more in the resources : WHO WAS THE FIRST ACCOUNTANT?
Best hopes ,
MostafaFinancial Statement Analysis & Ratios
Sorry guys ! I know that the topic we face it now is too earlier to discuss it but u know it just for help responding
for a friend of our work ask me if I know something ...
Ratios
for Financial Statement Analysis
for Financial Statement Analysis
| |
| Liquidity Analysis Ratios |
| |
 Current Ratio |
| | | Current Assets |
| | Current Ratio = | ------------------------ |
| | | Current Liabilities |
| | | |
| Quick Ratio |
| | | Quick Assets |
| | Quick Ratio = | ---------------------- |
| | | Current Liabilities |
| | | |
| Quick Assets = Current Assets - Inventories |
| |
| Net Working Capital Ratio |
| | | Net Working Capital |
| | Net Working Capital Ratio = | -------------------------- |
| | | Total Assets |
| | | |
| Net Working Capital = Current Assets - Current Liabilities |
| |
| |
| Profitability Analysis Ratios |
| Return on Assets (ROA) |
| | | Net Income |
| | Return on Assets (ROA) = | ---------------------------------- |
| | | Average Total Assets |
| | | |
| Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2 |
| |
| Return on Equity (ROE) |
| | | Net Income |
| | Return on Equity (ROE) = | -------------------------------------------- |
| | | Average Stockholders' Equity |
| | | |
| Average Stockholders' Equity = (Beginning Stockholders' Equity + Ending Stockholders' Equity) / 2 |
| |
| Return on Common Equity (ROCE) |
| | | Net Income |
| | Return on Common Equity (ROCE) = | -------------------------------------------- |
| | | Average Common Stockholders' Equity |
| | | |
| Average Common Stockholders' Equity = (Beginning Common Stockholders' Equity + Ending Common Stockholders' Equity) / 2 |
| |
| Profit Margin |
| | | Net Income |
| | Profit Margin = | ----------------- |
| | | Sales |
| | | |
| | |
| Earnings Per Share (EPS) |
| | | Net Income |
| | Earnings Per Share (EPS) = | --------------------------------------------- |
| | | Number of Common Shares Outstanding |
| | | |
| |
| |
| Activity Analysis Ratios |
| Assets Turnover Ratio |
| | | Sales |
| | Assets Turnover Ratio = | ---------------------------- |
| | | Average Total Assets |
| | | |
| Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2 |
| |
| Accounts Receivable Turnover Ratio |
| | | Sales |
| | Accounts Receivable Turnover Ratio = | ----------------------------------- |
| | | Average Accounts Receivable |
| | | |
| Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2 |
| |
| Inventory Turnover Ratio |
| | | Cost of Goods Sold |
| | Inventory Turnover Ratio = | --------------------------- |
| | | Average Inventories |
| | | |
| Average Inventories = (Beginning Inventories + Ending Inventories) / 2 |
| |
| |
| Capital Structure Analysis Ratios |
| Debt to Equity Ratio |
| | | Total Liabilities |
| | Debt to Equity Ratio = | ---------------------------------- |
| | | Total Stockholders' Equity |
| | | |
| | |
| Interest Coverage Ratio |
| | | Income Before Interest and Income Tax Expenses |
| | Interest Coverage Ratio = | ------------------------------------------------------- |
| | | Interest Expense |
| | | |
| Income Before Interest and Income Tax Expenses = Income Before Income Taxes + Interest Expense |
| |
| |
| Capital Market Analysis Ratios |
| Price Earnings (PE) Ratio |
| | | Market Price of Common Stock Per Share |
| | Price Earnings (PE) Ratio = | ------------------------------------------------------ |
| | | Earnings Per Share |
| | | |
| | |
| Market to Book Ratio |
| | | Market Price of Common Stock Per Share |
| | Market to Book Ratio = | ------------------------------------------------------- |
| | | Book Value of Equity Per Common Share |
| | | |
| Book Value of Equity Per Common Share = Book Value of Equity for Common Stock / Number of Common Shares |
| |
| Dividend Yield |
| | | Annual Dividends Per Common Share |
| | Dividend Yield = | ------------------------------------------------ |
| | | Market Price of Common Stock Per Share |
| | | |
| Book Value of Equity Per Common Share = Book Value of Equity for Common Stock / Number of Common Shares |
| |
| Dividend Payout Ratio |
| | | Cash Dividends |
| | Dividend Payout Ratio = | -------------------- |
| | | Net Income |
| | | |
| | |
| |
| ROA = Profit Margin X Assets Turnover Ratio |
| ROA = Profit Margin X Assets Turnover Ratio |
| | | Net Income | Net Income | Sales |
| | ROA = | ------------------------ = | -------------- X | ------------------------ |
| | | Average Total Assets | Sales | Average Total Assets |
| | | | |
| Profit Margin = Net Income / Sales Assets Turnover Ratio = Sales / Averages Total Assets |
| |
Sources : Financial Ratios
Accounting Framework Double Entry
Due to the discussion we did the last time naturally this is pushing us to new thought to be totally awareness about the basic fundamentals of Accounting
This Factor one of the most important factors in Write up work the main procedure of Accounting . Thus we have to ride our horse and begin from the
scientific term and definition .
Double entry system :
This system or manner was named by Accountants because of the dual that was derived from and be the only system of the framework for recording data and ledger .
As we said it depends on the dual that mean we have two sides right and left Certainly it mean more than left and right as we will figure it now
beside this our system didn't configure irregularly but it based on the main equation of Balance sheet :
Assets = Liabilities + Owner's equity +[ income =(Revenues - Expenses) ]
Note : we can call this equation The expanded equation
Therefore our system that called Double entry starts here as right and left two sides consist of amounts in each side have to be equaled and this another way
to figure the balance sheet equation . we can call the two sides Debit and Credit That's like what I owe and what I own .
This minor basis was derived from the main basis which is ( Resources = Sources of resources ) .
Question present itself : how we can use this system ?
Telling the use of this system require the recognizing of :
First : The pure basis :
* Resources = Sources of resources
* Assets = Liabilities + owner's equity
Second :What the two sides of the pure basis consist and that I think we get a long time to explain it before , in other words what Assets include
and what Liabilities include .
Third : [ The critical point is which one increases and which one decreases . ]
After detecting this steps we can completely apply the system as shown here :
Assets = Liabilities + Owner's equity + Income ( Revenues - Expenses )
(+) Debit (+) Credit (+) Credit (+) Credit (+) Debit
(-) Credit (-) Debit (-) Debit (-) Debit (-) Credit
Note : (+) refers to increasing
(-) Refers to Decreasing
Any Accounting transaction have to affect at least two accounts but it can affect more one account .
For example :
- If we say that Mostafa invests 50,000 pounds in business .
Solution :
We can after following the steps say that the two affected accounts is (Cash Classified under Assets) and (Capital Classified under Owner's equity)
Cash (+) that's mean it 's (debit) and Capital (+) that's mean it's(Credit) the change here in two side and two difference account at least
Cash 50,000
Capital 50,000
- Mostafa borrows 20,000 pounds from the bank .
Solution :
It seems to affect two sides and two difference Accounts also that mean (Cash classified under Assets) and (Note payable classified under Liabilities)
Cash (+) (Debit) Note payable (+) (Credit) .
Cash 20,000
Note payable 20,000
- Mostafa pays 6,000 pounds for some merchandise
Solution :
It's different this once because it affects one side but in two difference accounts ( Cash classified under Assets ) and ( Inventory classified under Assets)
Cash (-) (Credit) Inventory (+) (Debit) .
Inventory 6,000
Cash 6,000
- Mostafa pays 600 pounds rent of the place
Solution :
As usual the effect here is in two sides and two difference accounts ( Cash classified under Assets ) and ( Rent classified under Expenses )
Cash (-) (Credit) Expenses (+) (Debit)
Expenses . Rent 600
Cash 600
And so on , and so forth .
Best hopes ,
Mostafa
This Factor one of the most important factors in Write up work the main procedure of Accounting . Thus we have to ride our horse and begin from the
scientific term and definition .
Double entry system :
This system or manner was named by Accountants because of the dual that was derived from and be the only system of the framework for recording data and ledger .
As we said it depends on the dual that mean we have two sides right and left Certainly it mean more than left and right as we will figure it now
beside this our system didn't configure irregularly but it based on the main equation of Balance sheet :
Assets = Liabilities + Owner's equity +[ income =(Revenues - Expenses) ]
Note : we can call this equation The expanded equation
Therefore our system that called Double entry starts here as right and left two sides consist of amounts in each side have to be equaled and this another way
to figure the balance sheet equation . we can call the two sides Debit and Credit That's like what I owe and what I own .
This minor basis was derived from the main basis which is ( Resources = Sources of resources ) .
Question present itself : how we can use this system ?
Telling the use of this system require the recognizing of :
First : The pure basis :
* Resources = Sources of resources
* Assets = Liabilities + owner's equity
Second :What the two sides of the pure basis consist and that I think we get a long time to explain it before , in other words what Assets include
and what Liabilities include .
Third : [ The critical point is which one increases and which one decreases . ]
After detecting this steps we can completely apply the system as shown here :
Assets = Liabilities + Owner's equity + Income ( Revenues - Expenses )
(+) Debit (+) Credit (+) Credit (+) Credit (+) Debit
(-) Credit (-) Debit (-) Debit (-) Debit (-) Credit
Note : (+) refers to increasing
(-) Refers to Decreasing
Any Accounting transaction have to affect at least two accounts but it can affect more one account .
For example :
- If we say that Mostafa invests 50,000 pounds in business .
Solution :
We can after following the steps say that the two affected accounts is (Cash Classified under Assets) and (Capital Classified under Owner's equity)
Cash (+) that's mean it 's (debit) and Capital (+) that's mean it's(Credit) the change here in two side and two difference account at least
Cash 50,000
Capital 50,000
- Mostafa borrows 20,000 pounds from the bank .
Solution :
It seems to affect two sides and two difference Accounts also that mean (Cash classified under Assets) and (Note payable classified under Liabilities)
Cash (+) (Debit) Note payable (+) (Credit) .
Cash 20,000
Note payable 20,000
- Mostafa pays 6,000 pounds for some merchandise
Solution :
It's different this once because it affects one side but in two difference accounts ( Cash classified under Assets ) and ( Inventory classified under Assets)
Cash (-) (Credit) Inventory (+) (Debit) .
Inventory 6,000
Cash 6,000
- Mostafa pays 600 pounds rent of the place
Solution :
As usual the effect here is in two sides and two difference accounts ( Cash classified under Assets ) and ( Rent classified under Expenses )
Cash (-) (Credit) Expenses (+) (Debit)
Expenses . Rent 600
Cash 600
And so on , and so forth .
Best hopes ,
Mostafa
Discover Accounting Definitions IV
We discussed previously this but now .!
This is a critical concept for you to understand that the net income made is not the same as the cash because of three reasons :
- Because of applying the accruals concept to preparation of accounts. This is where we deduct from sales the amounts we have incurred to
achieve those sales WHETHER WE HAVE PAID FOR THEM OR STILL OWE FOR THEM is irrelevant
In other words we count all costs incurred including those still owing to trade creditors at the end of the year.The costs deducted in the accounts
will therefore be greater than the actual cash payments made where amounts are still owed at the end of the year. Similarly
the sales figure is not made up of cash received from customers but is made up of cash received together with that still to be received .
- Because of accounting for depreciation which is a deduction against profits for the measure of wearing out of a fixed asset and
therefore does not involve a cash payment
- Because of the way we value closing stock which can be by using average unit costs, the last unit costs or the earliest unit costs.
None of these methods reflect the actual flow of cash because they are all estimates only.
you will learn that this is where we consider FIFO (first in first out) and LIFO (last in first out) valuations of closing stock .
- Profit types :
There are many types of profits exhibit here as :
* Accounting profit :
Which is the difference between income received or receivable and expenditure paid or payable that mean the net income resulted by the business
without any Taxation purposes .
* Taxation profit :
The same Accounting profit After adjusting and reconciling for Taxation purposes .
* Cash surplus :
Which is the difference between the receipts and the payments .
* Economic profit :
Another view to the profit thus it's not our goal to be explained
- Accounting period :
It's the period which the business of firm under examination refers to a year usually Although that we have two distinction when we
mention the two main statement (Balance sheet , Income statement formally "trade account and profit and loss account")
First : The heading of the statement is in balance sheet written as (In " The date" means that the assets and the liabilities in specific date
equal some amount .
* For example : Balance sheet
In January 31 2007
Second : The heading in the income statement be different as ( For the "period" ended "date" means that the profit or loss that the business gained
recorded to this statement in other words the statement covers the specific period means all deals with other firms and transactions
unlikeness with balance sheet that represent the assets and liabilities of the firm in the end of the period .
* For example : Income statement
For the year ended December 31 2007
Best hopes ,
Mostafa
This is a critical concept for you to understand that the net income made is not the same as the cash because of three reasons :
- Because of applying the accruals concept to preparation of accounts. This is where we deduct from sales the amounts we have incurred to
achieve those sales WHETHER WE HAVE PAID FOR THEM OR STILL OWE FOR THEM is irrelevant
In other words we count all costs incurred including those still owing to trade creditors at the end of the year.The costs deducted in the accounts
will therefore be greater than the actual cash payments made where amounts are still owed at the end of the year. Similarly
the sales figure is not made up of cash received from customers but is made up of cash received together with that still to be received .
- Because of accounting for depreciation which is a deduction against profits for the measure of wearing out of a fixed asset and
therefore does not involve a cash payment
- Because of the way we value closing stock which can be by using average unit costs, the last unit costs or the earliest unit costs.
None of these methods reflect the actual flow of cash because they are all estimates only.
you will learn that this is where we consider FIFO (first in first out) and LIFO (last in first out) valuations of closing stock .
- Profit types :
There are many types of profits exhibit here as :
* Accounting profit :
Which is the difference between income received or receivable and expenditure paid or payable that mean the net income resulted by the business
without any Taxation purposes .
* Taxation profit :
The same Accounting profit After adjusting and reconciling for Taxation purposes .
* Cash surplus :
Which is the difference between the receipts and the payments .
* Economic profit :
Another view to the profit thus it's not our goal to be explained
- Accounting period :
It's the period which the business of firm under examination refers to a year usually Although that we have two distinction when we
mention the two main statement (Balance sheet , Income statement formally "trade account and profit and loss account")
First : The heading of the statement is in balance sheet written as (In " The date" means that the assets and the liabilities in specific date
equal some amount .
* For example : Balance sheet
In January 31 2007
Second : The heading in the income statement be different as ( For the "period" ended "date" means that the profit or loss that the business gained
recorded to this statement in other words the statement covers the specific period means all deals with other firms and transactions
unlikeness with balance sheet that represent the assets and liabilities of the firm in the end of the period .
* For example : Income statement
For the year ended December 31 2007
Best hopes ,
Mostafa
Discover Accounting Definitions III
Lately we just completed the discovering of balance sheet , our vision will converse to other side important more than one time
we Accountants called it Income statement . In recent times we post in two accounts to obtain the Net income exhibited as
the Trade account give us the gross profit and the Profit and loss account with using gross profit give us the Net income .
But now this technique of posting was configured as shown here :
- Accounting period :
The period that under the examination or the period that I gained the net income in usually a year .
- Sales :
the income receivable during the Accounting period , It's the value of goods and services that we represented during the period
- Cost of Sales :
It's the price we spend to get goods and services we calculate as :
* Opening stock which is the value of goods in the begining of Accounting period .
* Plus purchases of goods .
* Less Closing stock, which is the value of stock which exists at the end of the accounting period .
after this calculation less the result from the sales to get the gross profit .
- Gross profit :
Is the total of profit in the year later the trade account help us to result it .
- Expenses : It represent the expenditure including many examples :
* advertising
* rent and rates
* wages and salaries
* travelling expenses
* light and heat
* Office Expenses
* Miscellaneous Expenses
* bank interest
* loan interest
* Depreciation
* Provision for doubtful debts
* bad debts written off
and so on .
- Net profit :
Sales less Cost of sales result gross profit
Gross profit less expenses result Net profit
In other hand as we said in the past they used the Accounts not this statement as shown here :
- Trade Accounts :
Shows what Gross Profit the business has made within an accounting period It comes on top of the Profit and Loss Account .
- Profit and loss Account :
Shows what net profit or loss the business has made within an accounting period after deducting all expenditure from the income.
a net profit is earned if total expenditure is less than the sales figure. A net loss is made if it is greater. Comes underneath the Trading Account
Best hopes ,
Mostafa
we Accountants called it Income statement . In recent times we post in two accounts to obtain the Net income exhibited as
the Trade account give us the gross profit and the Profit and loss account with using gross profit give us the Net income .
But now this technique of posting was configured as shown here :
- Accounting period :
The period that under the examination or the period that I gained the net income in usually a year .
- Sales :
the income receivable during the Accounting period , It's the value of goods and services that we represented during the period
- Cost of Sales :
It's the price we spend to get goods and services we calculate as :
* Opening stock which is the value of goods in the begining of Accounting period .
* Plus purchases of goods .
* Less Closing stock, which is the value of stock which exists at the end of the accounting period .
after this calculation less the result from the sales to get the gross profit .
- Gross profit :
Is the total of profit in the year later the trade account help us to result it .
- Expenses : It represent the expenditure including many examples :
* advertising
* rent and rates
* wages and salaries
* travelling expenses
* light and heat
* Office Expenses
* Miscellaneous Expenses
* bank interest
* loan interest
* Depreciation
* Provision for doubtful debts
* bad debts written off
and so on .
- Net profit :
Sales less Cost of sales result gross profit
Gross profit less expenses result Net profit
In other hand as we said in the past they used the Accounts not this statement as shown here :
- Trade Accounts :
Shows what Gross Profit the business has made within an accounting period It comes on top of the Profit and Loss Account .
- Profit and loss Account :
Shows what net profit or loss the business has made within an accounting period after deducting all expenditure from the income.
a net profit is earned if total expenditure is less than the sales figure. A net loss is made if it is greater. Comes underneath the Trading Account
Best hopes ,
Mostafa
Discover Accounting Definitions II
In the Previous post we discussed just one section the balance sheet consist of but I think as long as the balance sheet
was configured we have time to discuss all of it .
we will continue our discovering start with the other section called liabilities as shown here :
- Owner's equity :
Simply Owner's equity comes in a lot figures we summarize it in :
* Capital : Usually we called the amount given in shape of money or other assets capital
* Shares : Another form of Capital was given by the owners of the company in some Company's types like (joint-stock company)
those are shareholders this shares invested by them
* Reserves : Amount remained in the business and not distributed to the owners
- Long-term liability :
Amount owed to some one else which are payable after the specific period include :
* Long term loans .
* Debentures : It's like the long term loans but secured when the business fails to repay back the loans the Fixed Assets of the business will be in risk
- Current Liability :
Amount which details the debts that a business must repay during the current year include :
* Creditors : Amount owed to other persons so-called suppliers .
* Accrual : the name we gave it to the amount still owed in the end of Accounting period .
* Proposed Items : special item for the coming period .
* Payable Items : like taxation payable for the coming period .
* Overdraft : amount owed to the bank so-called payable interest .
* Short loans .
- Provision : it's the amount equals with depreciation or can be subtracted from Fixed Assets
After all this points we discussed . urgent point have to be said .
- Net Current Assets :
The difference between current assets and current liabilities refer to it as working Capital (which finances the business of company)
- Net Assets :
The difference between total assets and total liabilities its result have to be ZERO to achieve the General Equalization we discussed
those two points did not appear in the balance sheet we just calculate them to illustrate the balance .
Best hopes ,
Mostafa
was configured we have time to discuss all of it .
we will continue our discovering start with the other section called liabilities as shown here :
- Owner's equity :
Simply Owner's equity comes in a lot figures we summarize it in :
* Capital : Usually we called the amount given in shape of money or other assets capital
* Shares : Another form of Capital was given by the owners of the company in some Company's types like (joint-stock company)
those are shareholders this shares invested by them
* Reserves : Amount remained in the business and not distributed to the owners
- Long-term liability :
Amount owed to some one else which are payable after the specific period include :
* Long term loans .
* Debentures : It's like the long term loans but secured when the business fails to repay back the loans the Fixed Assets of the business will be in risk
- Current Liability :
Amount which details the debts that a business must repay during the current year include :
* Creditors : Amount owed to other persons so-called suppliers .
* Accrual : the name we gave it to the amount still owed in the end of Accounting period .
* Proposed Items : special item for the coming period .
* Payable Items : like taxation payable for the coming period .
* Overdraft : amount owed to the bank so-called payable interest .
* Short loans .
- Provision : it's the amount equals with depreciation or can be subtracted from Fixed Assets
After all this points we discussed . urgent point have to be said .
- Net Current Assets :
The difference between current assets and current liabilities refer to it as working Capital (which finances the business of company)
- Net Assets :
The difference between total assets and total liabilities its result have to be ZERO to achieve the General Equalization we discussed
those two points did not appear in the balance sheet we just calculate them to illustrate the balance .
Best hopes ,
Mostafa
Discover Accounting Definitions I
Around the world ,with all times,past,present and future the human try to determine for every thing he live with
or use it definition According to the scientific experimental entrance to facilitate the understanding of this sciences .
following this steps enable us say that Accounting is a special science was derived from Social sciences founded by the human
So we should discover every term with its definition in order to conduct the function of Accounting in enterprises .
our tour commence from wider to narrower in Phase's definition of Accounting Cycle because of report's importance as shown here
First the Balance Sheet Words exhibit with :
- Accounting Equation :
Is a useful rule which helps when assembling the balance sheet figures. The rule which is always true is that:
Assets - Liabilities =Capital
Fixed Assets + Current Assets-Current Liabilities - Long term Liabilities = Capital + profit - drawings
- Accounting ratios :
Used to help make sense of the figures and include the following categories:
* Profitability ratios , used to compare the profitability of one company with another or of one company over time.
* Liquidity ratios, used to compare the liquidity of one company with another or of one company over time.
* Investment ratios, used by potential investors when making investment decisions.
* Efficiency ratios, used to compare company efficiency with others or with itself from one year to another.
Accounting ratios are only useful when used to compare:
One company's results over a period of time.
One company's results with another company. It is best to compare with the best
The company's results with those expected. It is useful to use budgets for this purpose
- Balance sheet :
It's financial statement showed a brief about the transaction of any firm representative in two sections
Assets and Liabilities pointed in one time , sometimes refer to it as "Snapshot"
- Accrual :
It's an amount unaccounted for yet , still owed and needs to be estimated and then added to the expenses deducted from the profit
in the (Profit and loss account) , The same amount also needs to be added to the Creditor account in the current liabilities section in the Balance sheet .
- Assets :
It's an item of value owned by the business means (Firm) .
- Current Assets :
Assets were expected to be used up and replaced within one year (commonly the Accounting period ) , Sometimes refer to it as "short term assets"
and this assets were distinguished with liquidity .
Minutely as :
* Cash : Amount of money kept in petty cash tin at the office of the firm .
* Bank : Amount of money kept in bank which the firm deal with .
* Stocks of finished goods or raw materials : This amount is also referred to as closing stock , appears both in the Balance sheet and in the Profit and Loss Account
* Debtors : Amounts owed to the business from its customer comes in two sides :
- Cash customers which pay for goods at the time of sales .
- Credit customers which pay for goods at later date
* Prepayment : Amount paid in advance (earlier time) .
* Drawings : Assets withdrawn from the business by the owners .
- Fixed Assets :
Assets used in business and not included in the purposes of resale representative in more one item
* Land . * Building used to be the place which the operations of the business done . * Motor vehicles Etc.
- Goodwill :
Type of Fixed Assets but in moral shape classified in two categories :
* inherent goodwill (natural moral value) * purchases goodwill
Any way The type of goodwill should not appear on the Balance Sheet .
Best hopes ,
Mostafa
or use it definition According to the scientific experimental entrance to facilitate the understanding of this sciences .
following this steps enable us say that Accounting is a special science was derived from Social sciences founded by the human
So we should discover every term with its definition in order to conduct the function of Accounting in enterprises .
our tour commence from wider to narrower in Phase's definition of Accounting Cycle because of report's importance as shown here
First the Balance Sheet Words exhibit with :
- Accounting Equation :
Is a useful rule which helps when assembling the balance sheet figures. The rule which is always true is that:
Assets - Liabilities =Capital
Fixed Assets + Current Assets-Current Liabilities - Long term Liabilities = Capital + profit - drawings
- Accounting ratios :
Used to help make sense of the figures and include the following categories:
* Profitability ratios , used to compare the profitability of one company with another or of one company over time.
* Liquidity ratios, used to compare the liquidity of one company with another or of one company over time.
* Investment ratios, used by potential investors when making investment decisions.
* Efficiency ratios, used to compare company efficiency with others or with itself from one year to another.
Accounting ratios are only useful when used to compare:
One company's results over a period of time.
One company's results with another company. It is best to compare with the best
The company's results with those expected. It is useful to use budgets for this purpose
- Balance sheet :
It's financial statement showed a brief about the transaction of any firm representative in two sections
Assets and Liabilities pointed in one time , sometimes refer to it as "Snapshot"
- Accrual :
It's an amount unaccounted for yet , still owed and needs to be estimated and then added to the expenses deducted from the profit
in the (Profit and loss account) , The same amount also needs to be added to the Creditor account in the current liabilities section in the Balance sheet .
- Assets :
It's an item of value owned by the business means (Firm) .
- Current Assets :
Assets were expected to be used up and replaced within one year (commonly the Accounting period ) , Sometimes refer to it as "short term assets"
and this assets were distinguished with liquidity .
Minutely as :
* Cash : Amount of money kept in petty cash tin at the office of the firm .
* Bank : Amount of money kept in bank which the firm deal with .
* Stocks of finished goods or raw materials : This amount is also referred to as closing stock , appears both in the Balance sheet and in the Profit and Loss Account
* Debtors : Amounts owed to the business from its customer comes in two sides :
- Cash customers which pay for goods at the time of sales .
- Credit customers which pay for goods at later date
* Prepayment : Amount paid in advance (earlier time) .
* Drawings : Assets withdrawn from the business by the owners .
- Fixed Assets :
Assets used in business and not included in the purposes of resale representative in more one item
* Land . * Building used to be the place which the operations of the business done . * Motor vehicles Etc.
- Goodwill :
Type of Fixed Assets but in moral shape classified in two categories :
* inherent goodwill (natural moral value) * purchases goodwill
Any way The type of goodwill should not appear on the Balance Sheet .
Best hopes ,
Mostafa
General equalization
We discussed in the latest articles the main topic Balance sheet with its details and so we go on
General equalization a term is used always by accountants to achieve balance to the require sheet
and it's originally Like A,B,C etc. when learning English language.
thus before we go on explaining the general equalization we should know what's Balance sheet (budget) and Its phases?
Balance sheet is statement for recording brief transaction of an enterprise to provide more financial information
concerning to the enterprise for the other directions in the society .
Accountants in the past specially in the nineteen century in Italy invented designation for the phases of Accounting Cycle
but we can't mention it in one article. So we can say that they make design for the General ledger, balance sheet,
assistant ledger and journal
to look like the letter T include two sides debit and credit and have to be balanced,
then followed by FASB and AICPA in acknowledgment of that
In this way the General Equalization considered one of the main accounting essentials that's mean in detailed manner
the journal entry debit and credit have to balanced , The general ledger have to balanced , the trial balance with its types
the total trial balance and net trial balance have to balanced , at the last the balance sheet
with its two side of the T Assets & Liabilities ,This manner benefit us with its easiness .
Although that fact.., Presently They figured new style of recording data transactions So-called American manner
not going in details but we focus in one aspect ,the balance sheet
in difference way they don't balance the two sides of the Balance sheet as it was previously ,but they apply some equation seem as :
* The Invested Capital = Fixed Assets + Invested Capital A
* The labored Capital = Current Assets - Current Liabilities
* The Invested Capital = Owner's equity + Long-term liabilities B
So that avoid mistakes in the old manner, this tactical equation must be balanced I mean that (A) = (B) and that's more related to the framework of accounting double entry method (will discuss it in another article )
Well , now we can say that General equalization is the main balance of all aspects of Accounting Cycle
Best hopes,
Mostafa
General equalization a term is used always by accountants to achieve balance to the require sheet
and it's originally Like A,B,C etc. when learning English language.
thus before we go on explaining the general equalization we should know what's Balance sheet (budget) and Its phases?
Balance sheet is statement for recording brief transaction of an enterprise to provide more financial information
concerning to the enterprise for the other directions in the society .
Accountants in the past specially in the nineteen century in Italy invented designation for the phases of Accounting Cycle
but we can't mention it in one article. So we can say that they make design for the General ledger, balance sheet,
assistant ledger and journal
to look like the letter T include two sides debit and credit and have to be balanced,
then followed by FASB and AICPA in acknowledgment of that
In this way the General Equalization considered one of the main accounting essentials that's mean in detailed manner
the journal entry debit and credit have to balanced , The general ledger have to balanced , the trial balance with its types
the total trial balance and net trial balance have to balanced , at the last the balance sheet
with its two side of the T Assets & Liabilities ,This manner benefit us with its easiness .
Although that fact.., Presently They figured new style of recording data transactions So-called American manner
not going in details but we focus in one aspect ,the balance sheet
in difference way they don't balance the two sides of the Balance sheet as it was previously ,but they apply some equation seem as :
* The Invested Capital = Fixed Assets + Invested Capital A
* The labored Capital = Current Assets - Current Liabilities
* The Invested Capital = Owner's equity + Long-term liabilities B
So that avoid mistakes in the old manner, this tactical equation must be balanced I mean that (A) = (B) and that's more related to the framework of accounting double entry method (will discuss it in another article )
Well , now we can say that General equalization is the main balance of all aspects of Accounting Cycle
Best hopes,
Mostafa
Benefits of Becoming a CMA/CFM
Benefits of Becoming a CMA/CFM
Many regard the CMA (Certified Management Accountant) and CFM (Certified in Financial Management) designations as credentials that compete with the CPA (Certified Public Accountant) designation. Nothing could be further from the truth. The CPA exam focuses on accounting, business law, auditing, and taxation in great depth. On the other hand, the CMA and CFM designations concentrate on breadth rather than depth.
The CMA exam has one part (Part 2) that covers, to some extent, the same financial accounting related material that appears on the CPA exam. For that reason, the IMA (Institute of Management Accountants) permits CPAs to become CMAs without having to take Part 2 of the CMA exam. Of course, CPAs do have to pass the other three parts of the CMA exam. Joseph J. Martin (1997), in comparing the CPA and CMA designations states:
The CMA exam has one part (Part 2) that covers, to some extent, the same financial accounting related material that appears on the CPA exam. For that reason, the IMA (Institute of Management Accountants) permits CPAs to become CMAs without having to take Part 2 of the CMA exam. Of course, CPAs do have to pass the other three parts of the CMA exam. Joseph J. Martin (1997), in comparing the CPA and CMA designations states:
"For the highly competitive, fast-changing, global business world in which they operate, companies need individuals who can demonstrate more than just a knowledge of the latest Financial Accounting Standards Board (FASB) and Securities & Exchange Commission (SEC) regulations. They must be able to make sound decisions and offer solutions within the requirement of those regulations that will benefit their organizations while keeping in mind the managerial and motivational aspects of a set of circumstances."
The CMA designation was developed to certify those individuals who could use accounting information to offer solutions and make sound decisions that take into consideration the economic, organizational, and motivational aspects of a situation.
Why should an individual become a CMA
Certainly, in some companies, obtaining the CMA designation is an important prerequisite to career progression. In other companies, the CMA differentiates among accountants and plays only a subtle role in career progression. However, having the CMA designation is very important when one seeks other employment. The CMA designation is often cited as a requirement or a desired attribute in position descriptions appearing in employment advertisements. This is especially so for the mid to higher-level accounting and finance positions.
One of the IMA's publications, Strategic Finance, periodically reports compensation by age and certification. The most recent published information is shown below: (Reichardt and Schroeder, 2000)
Why should an individual become a CMA
Certainly, in some companies, obtaining the CMA designation is an important prerequisite to career progression. In other companies, the CMA differentiates among accountants and plays only a subtle role in career progression. However, having the CMA designation is very important when one seeks other employment. The CMA designation is often cited as a requirement or a desired attribute in position descriptions appearing in employment advertisements. This is especially so for the mid to higher-level accounting and finance positions.
One of the IMA's publications, Strategic Finance, periodically reports compensation by age and certification. The most recent published information is shown below: (Reichardt and Schroeder, 2000)
The CMA and CFM exams both have four parts as described below:
CMA
Part One: Economics, Finance and Management
Part Two: Financial Accounting and Reporting
Part Three: Management Reporting, Analysis and Behavioral Issues
Part Four: Decision Analysis and Information Systems
CFM
Part One: Same as CMA
Part Two: Corporate Financial Management
Part Three: Same as CMA
Part Four: Same as CMA
As described, there is only one exam part that is different between the CMA exam and the CFM exam. Part 2 for the CMA exam covers all aspects of financial accounting. Part 2 for the CFM exam covers financial accounting (30%) and advanced finance topics (70%). Given the significant overlap between Part 2 of the CMA exam and Part 2 of the CFM exam, many who become a CMA or CFM go on to take the one additional Part 2 to become both a CMA and CFM.
CMA
Part One: Economics, Finance and Management
Part Two: Financial Accounting and Reporting
Part Three: Management Reporting, Analysis and Behavioral Issues
Part Four: Decision Analysis and Information Systems
CFM
Part One: Same as CMA
Part Two: Corporate Financial Management
Part Three: Same as CMA
Part Four: Same as CMA
As described, there is only one exam part that is different between the CMA exam and the CFM exam. Part 2 for the CMA exam covers all aspects of financial accounting. Part 2 for the CFM exam covers financial accounting (30%) and advanced finance topics (70%). Given the significant overlap between Part 2 of the CMA exam and Part 2 of the CFM exam, many who become a CMA or CFM go on to take the one additional Part 2 to become both a CMA and CFM.
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