Transcript Basic Accounting Requirements

Accounting and
Accountability
[What’s it all About?]
by
David C. Jones CPFA, FCCA (UK)
Basic Accounting Requirements
• Retain (real) net community capital intact.
• Maintain inter-generational equity (current users bear their
fair share of all costs, including capital financing costs)
• Compute “Omar’s Car Runs” costs
•
•
•
•
Operation
Maintenance
Administration & Taxes
Rent:
– Consumption of capital (depreciation)
– Adjustment of value (asset valuation)
– Return on investment (interest, dividends, retained earnings)
• Surplus (to cover):
– Risk
– Uncertainty
– New Activities
– Stability
• Fully utilize “Churchill Chart” of accounts (see next page)
“Pray let me have, by this evening, on one page, the status of
our tank deployment…”
[Winston Churchill, British Prime Minister – World War II]
Churchill Chart
STOCK
OF
GOODS AND
MATERIALS
TRADING
MANUFACTURE
OR
OPERATING
ACCOUNT
1
SALES
-------------------------REVENUE
INCOME
2
1
4
6
5
CREDITORS
(PAYABLES)
6
3
9
3
10
PROFIT
AND LOSS
------------------------INCOME AND
EXPENDITURE
7
4
DEBTORS
(RECEIVABLES)
12
23
2
8
11
SHAREHOLDERS
(STOCK
HOLDERS)
NET
EARNINGS
------------------------GENERAL FUND
SURPLUS
13
5
21
14
16
6
15
17
CAPITAL &
RESERVES (INCLUDING
FIXED ASSET
REVALUATION)
23
20
27
18
28
19
22
7
SPECIAL
FUNDS
-------------------------PROVISION
FOR EXPENSES
8
24
EXPENSES
25
MONETARY
INVESTMENT
9
6
10
LOANS
11
12
CASH
AND
BANK
13
DEPRECIATION OR
CAPITAL FINANCING
RESERVE
-------------------------FIXED
ASSETS
27
26
28
14
Accounting
Accounting is NOT Rocket Science
There are Only
14 Types of Cash Flows
and
28 Types of Other Entries
(TWICE as Many Other Types of Entries as Cash Flows!)
Moral: Results derived only from Cash Flows are inherently unreliable
(and may easily be misleading, or even fraudulent)
Accounting
You may think:
“That is all there is to
accounting?”
Well – IT IS!
Municipal Accounting for Developing Countries
by
David C. Jones, CPFA, FCCA (UK)
IT’S ALL IN
HERE!
[900 pages; © Chartered Institute of Public Finance and Accountancy
and The World Bank]
Goodbye!