The Language of Accounting

3. Knowing What To Look For

was the language the accounting system used to describe these two problems foreign? No. Was the solution a great mystery? Again, no. For TDO, the answer was simply to collect receivables faster. The accounting system identified the delinquent customers. For MAG, the answer was to raise prices. Once again, the accounting system showed which products and salespeople weren't following company policy.

All management needed was an understanding of the information available in the accounting system to help run the company. That's how we'll use your accounting system.

4. What You Want From Your Accounting System

The kind of information we found in the prior examples is what you want from your accounting system. This feedback must be accurate Fulfill management's requirements be easy to use

We can employ information like this in solving problems and running the business. As well as having the attributes of accuracy, relevancy, and simplicity, our accounting system ought to be set up in such a way that it does not require an inordinate amount of time to maintain. Remember, you aren't an accountant, and we don't want you to spend your time trying to do accounting.

Further, your accounting system should not require a CPA to operate it or to interpret the output. Some of the popular automated accounting systems require specific knowledge not only about computers but about the field of accounting as well. Make sure that those running the system have the background needed to install and operate it. If they don't, get a package that is more in tune with your firm's capabilities.

Further, if you are using an automated accounting package, it must run on the computer equipment that is either currently in place or to be acquired in the near future.

If you choose to use an automated accounting system, this book will be of immense help in teaching you the basics of how it works. Whether manual or automated, all accounting systems use debits, credits, a general ledger, and sub ledgers. All entries are posted the same way. The only difference is which buttons to push. The last chapter demonstrates methods of selecting the proper automated accounting system for your company.

5. Accounting For The Business Cycle

the business cycle is nothing more than the flow of transactions needed in your business to complete a sale and collect the proceeds. It's important to setting up your accounting system. We want to know what types of transactions are involved and the accounting entries to make along the way. Most companies business cycles progress something like this:

1. Purchase raw materials.
2. Enter goods into raw materials inventory.
3. Begin the manufacturing or assembly process.
4. Enter goods into work in process inventory.
5. Pay suppliers or pay employees (at service companies).
6. Complete the manufacturing or assembly process.
7. Enter goods into finished goods inventory.
8. Sell the inventory.
9. Collect payment for credit sales.

Briefly, here is the way your accounting system interacts at each stage of the business cycle

T0 Be Continued……..