Tuesday, January 1, 2008

Basic accounting

Dear Colleagues

Basic accounting is a very powerful piece of the management toolkit. But sadly accounting has been seriously corrupted by several developments over the past several decades. There are three main ways in which accounting has deteriorated:
  1. Accounting is based on a series of quite simple but very important principles, but more and more accounting and the reporting of financial information is governed by law and regulation that serves special interests at the expense of the fundamental accounting principles;
  2. Computers are being deployed to do accounting, and while they are very good at doing logical computations, they are not very thoughtful, and the amount of bad accounting has increased dramatically, and accounting control over the resources of an organization is surprisingly poor; and,
  3. People involved in accounting seem to have become much less ethical and professional than in years past, and accounting is now less of a profession and more of a business.

Though the accounting profession and accountants are not doing a very good job and seem to be compromised by these issues, accounting remains a very powerful tool that needs to be repositioned so that society is well served.

Whether accounting is based on a computerized system, or is done using old fashioned manual methods, accounting needs to be at the core of any operation. Documents and records need to be kept in a manner that facilitates the preparation of financial and performance reports, and facilitates checking of the records and the reports.

We will expand on these matters as the blog matures


Peter Burgess
The Tr-Ac-Net Organization