Accounting for Hard Work

Accounting is hard work... ask any Accounting Undergraduate.

It takes a long time to fully grasp the principles of accounting to the extent that debits and credits make sense and transactions are correctly recorded in groupings (Revenue, Expenses, Assets, Liabilities, Equity) to produce meaningful reports to guide Business Managers.

There are many areas of accounting that rely on the judgement of the practitioner, such as revaluation and depreciation and amortisation of assets. Other examples are calculations of provisions for bad and doubtful debts and the estimation of contingent liabilities.

In my many years of business consulting, I'm surprised by how many mistakes are made in operating accounting systems and the lack of understanding of basic accounting principles. Only this month I was asked to explain why a client's accounting system produced an incorrect Business Activity Statement (BAS).

When faced with this sort of problem, I usually go back to first principles and perform a manual reworking of the computerised report to compare against. The first thing I did at this client was scan a listing of Sales for the month for unusual entries.

Near the top of the list was an $800,000 transfer from the customer's bank for the funding of a piece of equipment. This amount should've been treated as a loan but was incorrectly coded as income! A very costly error as profit and tax payable would've been overstated had the error not been detected.

The Axsapt help desk seems to be overwhelmed at times by operators confused by Bank Reconciliations. In many cases, errors made are "corrected" with entries that make the problem worse. In some cases, we recommend our customers prepare a manual bank reconciliation for comparison purposes, but very few people these days remember or have ever known how to do this?

When faced with these sorts of problems, operators should acknowledge their limitations and post unusual transactions to a Suspense account rather than often guessing incorrectly. In this way, the Company Accountant can review and advise appropriate postings rather than spending even more time and money fixing errors.

More training is also a great investment. Classroom courses will help new staff come up to speed much quicker and will help experienced users make better use of their systems. "One-on-one" training sessions are also recommended to help operators really nail complex aspects of their operations.

For more information: Axsapt