Introducing "The Everything Accounting Book"

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Though I have been in the Business and Finance Department since 24 February, until now I am clueless as to the financial standing of our institution. That is because it took me some time to pass my previous responsibilities to the new Acting Academic Dean. In fact, even now, from time to time, I am still involved in academic affairs, though not as heavily as before.

16 March was the mark of a new stage in the business office. The current accounting staff has stopped receiving and releasing money and said that he would start focusing on organizing all the transactions from the 1st of January to 15 March. In fact, the BOT of the school informed me to prepare a financial report for the month of March before their next Board meeting on 07 April.

Sitting in my office and contemplating my tasks, I picked up a book written by Michele Cagan, The Everything Accounting Book.

As usual, I browsed the chapters and table of contents. The words “debit” and “credit” caught my attention. And so, I checked the exact page to know what the author is telling about these terms.

All I know about recording financial transactions in the past include the following items: date, particulars, add, minus, and remaining balance:

Date	Particulars	Add	Minus	Remaining Balance
17 March	Collection	6,600.00	-	6,600.00
	Fluorescent - TESDA		700.00	5,900.00

I thought debit and credit are just as simple as addition and subtraction or recording income and expenses and thereby increasing or decreasing the remaining balance. To my surprise, debit, and credit are not as simple as I thought. Accounts are increased or decreased depending on the type of account a bookkeeper is working with. To illustrate this, I used the table provided in the book:

Account Type	Debit	Credit
Asset	Increase	Decrease
Liability	Decrease	Increase
Equity	Decrease	Increase
Income	Decrease	Increase
Expenses	Increase	Decrease

I still need to figure out if the above information is really relevant to our situation.

After browsing the table of content of the book, another thing that caught my attention is the Top Ten Accounting Mistakes:

• Not knowing your true cash balance: Due to things like automatic payments and bank charges, money that appears in your cash drawer and your checking account may already be spent.

• Extending credit without checking credit: Until you collect some basic credit information about a customer, don’t make on-account sales. A sale isn’t much good if your company never gets paid.

• Mistaking profits for cash: When you have a lot of credit sales, your company can post big profits without seeing any cash.

• Paying bills too soon: If your vendors give you thirty days to pay them, take it. Unless you get a discount for paying early, paying your bills only when they’re due improves your company’s cash flow.

• Avoiding bookkeeping tasks: Not recording and posting transactions regularly leaves you with a mountain of bookkeeping to deal with instead of a molehill. Plus, the time lag can act like a vacuum, where transactions disappear and have never been recorded.

• Not hiring a payroll service: The minor cost of hiring out this task provides a huge benefit for your company. It can free up your time and help avoid the financial penalties that go along with late and incorrect filings.

• Paying accidental dividends: Every time a corporation owner takes money out of his business, it counts as a dividend. That can lead to a bigger personal income-tax bill.

• Not keeping personal finances separate from business: Mixing up business and personal money can cause bookkeeping and legal problems.

• Setting prices too low: Know your costs before you set product or service prices, or you run the risk of losing money on every sale. A simple break-even analysis can help you set prices at a profitable level.

• Turning over all the financial stuff to someone else: Without an intimate knowledge of your company’s finances, you can’t make successful decisions. Even if you don’t want to deal with the daily bookkeeping tasks, look at your financial statements every month to help you plan for profits and prevent potential problems.

(Source: Cagan, Michele. The Everything Accounting Book, Massachusetts: Adams Media, 2007. p. x.)

Though the above list of mistakes is primarily taken from the business world in general, I think there are principles that remain applicable to an educational institution like ours such as knowing our true cash balance, the importance of regular recording of transactions, and separating personal money from the school money.

After reading the above list, I went straight to the introduction.

The author introduced the idea of the importance of accounting by emphasizing the important role of numbers to take advantage of the endless opportunity in the business world and to protect one’s company from crashing.

She also added that though accounting might appear intimidating to outsiders due to its complexity, still knowing the basics are of paramount importance. The complicated aspect is best left to the professionals, but the owner must make it part of his/her primary task to obtain a working knowledge of the basics of accounting, especially during the infancy stage of his/her business. Such fundamental knowledge of accounting can make or break a business.

Furthermore, the writer emphasizes that a basic understanding of the numbers is a necessity in monitoring the company’s financial position. And that’s what the book offers, providing practical knowledge of how daily transactions are done and how the financial statements are interpreted.

That’s it for now. In the next article, I plan to share insights taken from the first chapter.

Grace and peace!

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