Cost accounting systems are an important managerial accounting tool for measuring and reporting accurate product costs. With that as background and the premise that the objective of accounting and finance education is to prepare people for their entire careers, we can proceed to the main topic. Setting aside accounting period technicalities, revenue recognized in the financial statements for a product or sales contract through time t is determined by the following revenue recognition function:. Again setting aside accounting period technicalities, expense recognized in the financial statements for a particular resource or set of resources through time t is determined by the following expense recognition function:.
Accounting principles and methods used by the firm—as well as descriptions and details of financial statement components, and other financial matters relevant to users—are fully disclosed in the financial statements. This is a very common mistake that small business owners make – they hire someone who is not qualified to take care of the accounting and QuickBooks®.
This is but one simple example of how understanding accounting mechanics—so-called, debits and credits”—does not provide accountants or managers with an adequate understanding of accounting concepts and principles, which is in fact a necessary prerequisite for understanding accounting methods in general. The key here is to set up an accounting process that is independent of the people carrying out the process.
The keys to monitoring accounting staff are a) setting clear expectations for your staff, b) documenting procedures to be followed, and c) go over expectations and procedures with your staff. If you want to review your accounts receivable aging on Fridays then you need to let your accounting staff know that all sales invoices and payments need to be entered by end of day on Thursdays.
Many times accounting staff get interrupted throughout the day or have to put out fires and they don’t get the time they need to take care of their daily duties. In order to set up a process for your accounting you need to document your accounting procedures and keep them up-to-date. We went through so many bookkeepers over 25 years that we finally decided to just go to outsourcing accounting.