accounting

AR Factoring Step by Step

2009-06-06T03:36:00.000-07:00

Have you ever been frustrated, even if you have good customers, it takes a long time to collect, and that is always opportunities to new business? It takes too long to pay their debts to their suppliers? If you answered "yes" either question then would be interested in this cooperation.

AR Factoring is a financing instrument, with the company to sell the bills that the customer in respect of claims at a discount in return for payment. The financial institutions get money on the basis of their claims and to manage your portfolio for you.

We explain step by step how the AR factoring. The first thing in your business to do, which bills the customers of the factoring company is for you. The bills, the customers with a duration (eg 90 days) to pay and has not. AR factoring company you will factor agent to consult your case and their financial stability and to determine whether they pick up their customers.

To determine whether your case and determining a discount rate for your company. If you believe that this Agreement is for your cash flow, the next step is filling out paperwork, and then the factoring company to deposit an amount in your AR account, expressed as a percentage of receivables.

AR factoring principal objective is to increase working capital through the possibility to have more cash flow for you to meet their commitments or to increase their investments. If you are in the business of export, for example, and predict, the new game console is a success in the upcoming holiday. So you can invest in the large number of new game consoles are for sale, you must credit from your provider. But these operators do not want to give credit and do you expect full payment for their goods. AR Factoring you can buy at these providers, it would have working capital, you need to buy the products you need.

AR Factoring is a legal and widely accepted. However, you need to be aware of the cost of your company. We suggest that if you decide to factoring, you can keep costs to the customer to a certain percentage, without too much.

Become a Qualified Accountant

2009-06-06T03:34:00.000-07:00

This question can be provided by someone who is interested in your career in the audit. Of course, it is only natural that intelligent people always want some proof of competence and skills they possess. Same happened with me when I started my career in the accounting firm but it was easy for me to decide because there are too many good advisers around. But many people, the development in the areas of accounting, but not currently in some areas and no academic background.

What do you need for professional qualifications are recognized and professionally?

Professional qualification in Accounting is supported by various certificates issued by agencies in most countries of the world. This qualification allows you, after you already have a degree. These agencies are working around the world in the form of organizations, associations, clubs, etc. all have 2 major goals: protecting the public interest by setting high standards in professional practice (including certification) and to protect the interests of professionals. But in real life, their activities are often the repetition of the unions.

But in today's job market that has such qualifications shall be deemed to be competent and credible to a wide range of professions, the elderly and almost twice as much pay as those who do not. Apart from the automatic accounting qualification offers the opportunity to promote the management positions in the accounting department of a company.

There is a presumption that such qualification, applicable only to those who in practice (in practice means that companies, the accounting, auditing, taxation, financial and similar services). But even if only partially, but does not mean that possession of these qualifications in the industry does not entitle you to higher wages and opportunities.

What are the most recognized and respected professional qualifications?

In particular, all certificates may be through a series of exams and practical experience demonstrate. Most accounting certificates are only available in the country in which the issuer (professional association or institution) is located. When it comes to really valuable and internationally recognized certifications are not many around the world. If we only people who actually add value for your sheet, the following list:

ACCA - issued by the United Kingdom Association of Chartered Certified Accountants (accaglobal.com). - More practice-oriented, internationally recognized certificate.

ACA - United Kingdom, published by the Institute of Chartered Accountants in England and Wales. (1.icaew.co.uk) - more practically-oriented certificate.

CIMA - issued by the United Kingdom Chartered Institute of Management Accountants. (cimaglobal.com) - more industrial management.

CPA - U.S. - on the basis of the American Institute of Certified Public Accountants (aicpa.org) - widely recognized in practice and industry in the U.S. and Canada.

What are the entry requirements for the start of the qualification?

Minimum entry requirements vary by country, but most of the professional qualifications in the accounts are open to all who some prior training. In some countries, including the possibility of the school at the beginning of some of the terms and conditions are met. For more information, you should refer to websites of organizations mentioned above.

Accounting Ethics

2009-06-06T03:32:00.000-07:00

Bookkeeper at a certain time in their career they are forced to decide whether your situation is ethical or not. Professional ethics is an important aspect of the work of an accountant. As an accountant, a commitment to each customer to show competence, confidentiality, integrity and credibility. The competition is where you should be a degree of professionalism, as well as the development of knowledge and skills needed as a counter. Confidentiality is as if an accountant should be confidential information unless authorized or required by law, to customer information. Integrity is when you must work with our partners to avoid any conflict of interest exists. Finally there is the credibility, that is, if the information in a reasonable and objective.

An ethical problem would be in a company that works. You can do something that the company or employee is ethically wrong. You will find unethical behavior or conflict. For example, if you work for a company finds that an employee is withholding money from the company. If it should try this with the policy that the companies are trying to solve the problem. For example, a policy that a company can have to something similar to the finding that each employee an appropriate professional conduct and ethical business practices with integrity, confidentiality, credibility and competence. You can also tell where you need to speak out when a situation is unethical. If your company has no policy should be the discussion on the situation with your supervisor. If you think your boss is able to go to the next level of management.

If you try out an ethical question of how an employee must understand business and business strategies. If you believe you may be at risk of ethical conflicts, then you should also contact your attorney. This is because your attorney can advise you what is best for you is to do in a given situation. They also have interest, and if you feel like you can not work for your company over time, then you need to notice your company and your license. Sometimes, when the situation is urgent, and that then, what can you do the best bet.

Accountants are well known and respected for his honesty, demonstrating integrity and competence. It is therefore important that all the accountants and their companies to exchange best practices and ethical practice. Ethics and Responsibility is a professional show and must be taken seriously. There are many companies which do not show these things and are no longer in business. A good example is a company under the name of Enron Corporation. This scandal affects your business and what happened was that there is involvement of irregular accounting and caused the bankruptcy of Enron. The question of fault in this case refers to a counter, and she has shred the document was in the audit of Enron and the bookkeeper was convicted and forced to surrender his CPA license. This is an example of the primary, what could happen if they participated in an unethical situation. This is also a good example of why it is important for all the switches to monitor good practice and ethical values, because you do not want to display the counter in the Enron case.

Principles Of Accounting

2009-06-06T03:30:00.001-07:00

Altogether there are nine principles that are used by all accounts. Any company that accounts associated with one of these principles is supported by professionals in the world, such as invoices, with the principles stated in the rule of all the counters in the world.

If these principles were not used, and the financial data were randomly thrown together, and the accounts of their societies, it would be complicated, to put it mildly. All of these new accounting standards will contribute to your business' needs directly and in a methodical procedure that everybody can understand.

The mother of all principles of accounting is an accrual-based accounting and ensure that all companies on the revenue and expenditure will be methodical, if the money is earned, if not paid. It is a sentence, so that money in the world of high finance companies, and the principles of revenue recognition will continue to ensure that the recognition of good.

Accountant with a historical cost principle, when filling out your company's accounts. These accounts can be ice cream in a table and see what the price of the item sold, the cost of corporate records of the recording business accounts. There are other transaction accounts may be with this principle, and that is the basis of current cost accounting.

For the financial records are in line, accountants often systematically from their customers through their financial transactions to ensure consistency of principles. In this way financial information is there, again and again, and there is no confusion in the data after a long period.

If others are with the consistency of principles, the end of May, the numbers wrong. Tax examiners believe that this is the case in companies that are conducting illegal activities, and do not want to let a lot of information can be easily, and companies do not want this bad in such an important group, as the Internal Revenue Service.

To view the financial records of businesses to be confused with other costs incurred by the entrepreneur, such as the accountants to use the concept of an independent legal person in the conduct of a financial services company and the staff of banking transactions a person who has a small business owner. Some entrepreneurs confuse and withdrawals from their accounts for individuals, and do evil in the entries of the two types of controls.

MYOB Options When Printing

2009-06-06T03:28:00.000-07:00

When you print or e-mail accounts, you have a multitude of options to choose from. You can make a batch of invoices through a series of numbers, the actual printing of bills in a period, select a client, then print the invoice that the customer may have requested copies, and so on. These options are in the expanded window Print / e-mail accounts in the Command Center.

Go to the sales - Print / E-mail accounts and select the tab at the top, to be printed or sent. Click on "Advanced tab" Filter "midway on the page. Select the type of sale you use, ie, line, services, professionals, etc. Time Billing

MYOB Choose Default to all customers, but you can choose a selection of clients or customers, if you prefer. Next, select the status of the sale. There are several options. Open refers to all invoices that have not yet been paid. Credit refers to loans of any trial. Be concluded that the bills are paid. All invoices are open and closed invoices. Orders through the contributions of orders processed, how they relate to the quotes. All revenue is a combination of the above.

The other three options allow you to filter even more options. With or without shipping invoices show that not only the previously printed or e-mail. You can further narrow by entering a period that could be used if you print all your bills at the end of each month. You can also choose to view a batch numbers of invoices between xxx and xxx.

After you have made your selection, click OK at the bottom of the screen. Consideration of the sale before the delivery window displays the selection. In the left column, check the invoices to print or e-mail. Simply click on the box at the top, all invoices will be selected. If you print your selection, select the number of copies of each invoice to print and click Print.

If the e-mail function, you must make every customer's e-mail address in their profile card. You can e-mail address simply by typing the correct address in the e-mail address. This could be used if you have a bill for a new customer or an existing customer whose e-mail address has changed.

Before sending your e-mail, click the default e-mail icon at the bottom of the window and the subject and the message by default is what you want to send or make the necessary changes. Click O.K. E-Mail J.

Accounting Methods – Cash and Accrual

2007-10-28T00:42:00.000-07:00

by: Richard A. Chapo

When starting a business, you have to determine the method you are going to use for accounting and paying taxes. The two choices are the cash method and the accrual method.

Cash Method
If you are looking for simplicity, the cash method is probably your best accounting choice. Generally, income and deductions can be claimed when payment is actually received or made. This is best shown with an example.

I open a small business and have to order business cards and stationary. I receive the products and pay the invoice on November 18, 2005. Under the cash method, I can deduct the cost on my 2005 tax return.

Some businesses are restricted from using the cash method. C corporations may only use the cash method if they have less than $5 million in gross revenues for a particular year. Professional Service Corporations can use the cash method without limit, while farming corporations can due so if gross revenues are less than $25 million. Tax shelters are prohibited from using the cash method.

Accrual Method
The Accrual Method of accounting is a bit more complex. Under this method, the focus in on the date the expense is incurred, not paid. Although this may seem a small difference, it can play havoc with your books and piece of mind.

Using our previous example, assume I order business cards and stationary on the December 18, 2005. I receive the products on December 30th, but don’t pay the invoice until January 20, 2006. When can the expense be claimed? It depends on when economic performance occurred.

Generally, economic performance occurs when goods or services are provided to you. In the above example, economic performance would arguably occur when the business cards and stationary were delivered with the invoice on December 30th. Thus, I would be able to deduct the expense for the 2005 tax year.

In Closing
As you can see, the cash method is the easier of the two accounting methods. To determine the best method for your business, speak with a tax professional.

About the author:
Richard Chapo is with Business Tax Recovery - Stop overpaying small business taxes. Read more business tax articles.

7 Things to Consider Before Buying Small Business Accounting Software

2007-10-28T00:41:00.000-07:00

by: William Siebler

The world of small business accounting software can be a minefield for any business owner. However choosing the right package is one of the most critical business decisions you will make.

Here are the seven things you must consider before making a purchase that will help you achieve your businesses goals.

1. Scalability
Businesses change over time so it's critical that the small business accounting software you choose can change too. Some things that often change are the number of products and services offered and the number of employees. When you choose your package try and imaging the business in 5 years or 10 years time and how different it will be. Use this information to guide your purchase decision. It may well be better to pay a little more now for the software knowing that it can be easily
upgraded when needed with minimum disruption and cost to your business.

2. Support
It is important that any software has great support for when something goes wrong (and it always does). Most major companies offer support but you also need to think about support in your local area. It's often much easier to have someone locally come in and do things you need done with your software than have someone trying to help you over the phone. Make some
enquiries with other businesses about the package they use and who helps them.

3. Accountant Interface
It's most unlikely you will handle every aspect of your businesses accounting. Your accountant is an important factor in making the right decision. What software are they used to working with and what do they prefer? Can you easily supply them data and reports from your package without the need for any extra work (which you'll have to pay for). Don't be afraid to ask their opinion as they live and breathe this stuff.

4. Best Value For Money
Once you have selected the right package for your business you may as well get the best value. Shop around as the price can vary greatly and the product is exactly the same. Online merchants such as Amazon may offer better pricing because of the sheer volume of products they sell. However price is only one part of the equation so if their is great merchant locally with support or installation assistance this may be far more valuable.

5. Major Brands
There are two major players in the small business accounting software market. They are QuickBooks and Peachtree. Microsoft is expected to enter the market soon. I recommend choosing a major brand so that you can get regular updates and you know the company will be around as long as your business needs them.

6. Ease of Use
Ease of use is a personal thing but it is worth trying the software before you buy it if you can. Remember to get the person who will be the main user to test the software as well. Also consider how well the package can interact with other software you use. This is an advantage the Microsoft package may have when it's available.

7. Features Needed
I touched on this earlier when talking about thinking ahead as to where you business will be in 5 or 10 years time. Most accounting software packages come in several different versions. If you don't need certain features now and can't see a need for them in the future then don't buy them. The major differences are usually - number of users allowed, inventory management capability and number of reports available.

To sum up think ahead when planning your purchase of small business accounting software. You will make a much smarter business decision that will save you plenty of trouble and money in the future.

About the author:
Please visit us for more information and a feature by feature comparison of:
Small Business Accounting Software

Asset and liability basics

2007-10-28T00:39:00.000-07:00

by: Mansi gupta

Knowledge of accounts can make life much easy. If you are to invest in a new business or joining your forefather’s business, planning to take some loan, looking for job in any marketing company, desire to be the manager of a multinational company or have the onus to manage your own assets and liabilities, knowing some basics of accounts becomes mandatory.

Broadly, accounting is bifurcated into two categories-

Cash Bases Accounting
Accrual Accounting

The Cash Based accounting pertains to the management of an individual’s personal monetary transactions. In this case, he keeps a track of the money he withdrew, deposited, gave or received from someone etc. This accounting comes to life when actual cash transactions take place.

The Accrual Accounting requires an accountant who notes the transactions even if no money has been actually exchanged. This method works on the principle of comparing or seeing the ratio of the expenses to expenditure. If the expenditure is more, you need to cut down your luxuries, if not then it’s always good to have some savings for future. This type of accounting tells you the amount that you owed; this might not match with the figure of your bank balance.

In the language of accounting there are several key terms that one needs to be familiar with. Some of the crucial ones are discussed below-

The Assets- the assets are generally those possessions of an individual that have a good market value or are quite valuable. Assets are mainly classified into three types-
Current Asset- the cash is the most basic asset of any individual. The money that is being held in accounts like the checking and savings accounts is also included in the cash. Also inclusive are the marketable securities in the form of bonds, stocks, shares etc. The money lent or payments due from clients, even form a part of it.

Fixed Asset- comprises of all the tangible valuable things like property, machines, equipments, land and the like that are not meant to be sold.

Intangible Asset- incorporates all the untouchable things like copyrights, patents, trademarks etc. that have tremendous monetary significance.

The law of opposites governs the nature; where there are assets, there will be liabilities. These are the debts that you have to pay back to your creditors. This can be done through giving cash or any other asset like jewelry, some other goods etc. Liabilities again are of two kinds-

1. The Current Liabilities- the liabilities that are to be paid back within a certain time limit and most often through your current assets. These include the accounts payable i.e. type of bill that you have to monthly, the Notes Payable-loans taken from banks meant to be repaid within 30 days and the Accrued Expenses- the compulsory expenses like taxes, wages, interests etc. where the bills are not received but the balances of each must be repaid.

2. Long Term Liabilities- those debts that can be repaid at ease for the tenure is more then a month.

The Financial Capital- is the economic capital. It is any liquid medium or merchandise that stands for wealth or other styles or capital. There are four ways to manage and display the financial capital. First, this capital is needed when a contract is made with any sort of capital asset. The financial instruments work in the form of currency in case of sale, purchase or trade of goods i.e. the medium exchanges. Second, it works as a settled medium or mode like gold for the
Standard of Deferred Payment. Third, The Unit of Account has a market value attached to it which in turn varies with the economy of the country. Fourth, The Source of Value is concerned with financial capital that needs to be saved and recovered. It is a collection of things like gold, real estate, collectibles etc.

Petty Cash is an important factor in business. It is the smallest account within a business setting or the cash in bills and coinage required to pay little expenses.

Types of Business- there are several kinds of business one should be aware of like

Sole proprietorship- where a single individual who starts the business owns it too.

Partnerships- the companies or businesses started by two or more persons where they conjointly own it.

Corporations- involve lot many shareholders or investors who are responsible in taking decisions for the company.
Limited Liability Companies- can be said to be sisters of corporations. Here the business members are not under a legal obligation to pay the debts if the business fails.

Payrolls- the term payroll designates the manner in which you will be paying the employees of your company and even yourself. Many multinational companies cater to payroll service provider companies that do the work quite efficiently.

These are some of the broad guidelines that will help you grasp the basics of accounting. It is essential to have some such wisdom for accounts as it is fruitful in all walks of life.

About the author:
Mansi gupta writes about asset and liability Learn more at

After the latest and accurate help in relation to accountancy.

2007-09-25T20:33:00.002-07:00

by: Tom

When you are looking for high-class advice concerning accountancy, it will be hard sorting out the best information from foolish accountancy proposals and guidance so it's best to know ways of moderating the information offered to you.

NetSuite: Small Business Accounting
NetSuite offers an integrated online accounting application with ecommerce, sales, inventory, shipping and support. Free Trial.

Now we would like to offer you some advice which we advise you to use when you are searching for information about accountancy. You need to realize the guidance we put forward is only pertinent to internet based information concerning accountancy. We don't really offer any direction or assistance when you are also conducting research in books or magazines.

OpenPro: Web Based Accounting
Offers Web-based, open source ERP accounting system with financials, supply chain, manufacturing, CRM and ecommerce features.

An interesting tip to pursue when you're presented with information and suggestions on a accountancy website would be to determine who owns the site. Doing this could reveal the owners accountancy credibility The easiest way to reveal who owns the accountancy web site is to find the sites 'about' page.

Any reputable site providing information concerning accountancy, will always have contact information which will record the site owner's contact details. The details should make known some key points concerning the owner's requisite knowledge. You can then arrive at a decision about the webmaster's depth of experience, to offer guidance about accountancy.

About the author:
Tom Brown is the webmaster for

How to Choose the Right Accounting Software for Your Business

2007-09-25T20:33:00.001-07:00

by: Brandon Hall

With any good luck and a good amount of hard work, you're having the same problem many business owners today are facing. Your business is growing rapidly and you're having problems controlling your finances. Time and time again, that Microsoft Excel spreadsheet you've been using just isn't getting the job done for you.

So, you’ve decided that you’re ready to take the next step, and buy a full-featured accounting software program. Many options are available to choose from, but I believe the best solutions to be Quicken Premier Home and Business by Intuit, QuickBooks Pro also by Intuit, and Peachtree Accounting by Sage. In order to decide on the right package for you, you need define the type of business that you operate.

With the rise of self-employment (businesses with one or more owners but no paid employees) a need has arisen to manage business and personal finances on one platform. Intuit has released Quicken 2005 Premier Home and Business to fill this need.

This software is perfect for the small business owner who receives income from investments, real estate, and/or internet
marketing. Also, Quicken 2005 Premier Home and Business is well priced at only $89.95.

For more typical brick-and-mortar business owners, you will usually need a more robust solution like QuickBooks Pro or
Peachtree Accounting for functions like payroll reporting and check producing. Each piece of software has its advantages,
but don't forget that QuickBooks has been the standard in business accounting software for many years now. As for features and basic operations, both applications will provide you the same functionality and convenience for your business.

One additional factor to consider in your decision is that Peachtree Accounting is less expensive than QuickBooks. Both
starter versions of Peachtree and QuickBooks are priced at $99.95 each, but the full-featured version of Peachtree is priced at only $199.95 while the full-featured QuickBooks Pro is priced at $299.95.

At the end of the day, the biggest advantage QuickBooks offers over Peachtree is compatibility with other applications. For example, most commercial banks (Bank of America, SunTrust, etc...) provide you with files designed to work directly with

QuickBooks, so that you can read, study, and decipher transaction details. Also, some banks will allow you to update account information in real-time with QuickBooks. Check with your bank to see what accounting software their online services support, and you should be able to make your decision.

About the author:
Brandon Hall owns which is a site dedicated to providing resources, links, articles, and news related to accounting software products.

Do You Need Accounting Software For Your Small Business?

2007-09-25T20:32:00.002-07:00

by: Jakki Francis

If you’re anything like me then you dislike with a vengeance doing your accounts and taxes.

So how can you make this process easier, less painful and cut your accountancy fees?

Well buying an accounting software package is one way.

First of all you need to decide whether you are going to keep your accounting records manually, that is using pen and paper, or whether you are going to computerize the process.

If you decide that computerizing the process is the way to go then you need to decide whether to buy an accounting software package, for example Sage or Quicken, or whether a spreadsheet, such as Microsoft Excel will suit your needs better.

As a general rule if you are a cash business that just needs to record income and expenditure then you are better off using a spreadsheet.

So, should you choose an accounting software package? Yes if:

· You have customers to whom you extend credit and you buy goods in the same way

· You process in excess of 50 transactions per month

· Your business is an Incorporated Company (Limited Company in the UK)

and

· You are computer literate or are willing to learn!

Before choosing the accounting software, speak to your accountants – they will be familiar with the various accounting software packages on the market and will be able to advise you. Most accountants use software in their office to process the bookkeeping for their clients and will have a working knowledge of the accounting software package they use. It may be cheaper for you to use the same one they do, because they can advise you how to get it up and running and will be on hand to answer questions, plus at your financial year end when your accounts need preparing it will be less expensive, believe me to have a compatible program.

I also recommend doing some research yourself, you may be able to obtain a demonstration disk or download of the most popular accounting software packages and this will give you an idea of how they work and if they are user-friendly.

The cost may also be an issue, so you need to decide on your budget. But consider how your business is likely to expand - you may outgrow that budget accounting software quickly and end up buying the more expensive one anyway.

Accounting software providers may also try and up-sell you a maintenance contract. Save your money! In my experience the established software providers will not have bugs in their systems. They will also try and upgrade you to the next version on a regular basis, but if the software is doing everything you need then there is no need to upgrade.

Of course, you could also pay someone to do your accounts for you, either your accountant or a bookkeeper – the payoff being you don’t have to do it yourself and it frees you up to actually run your business!

Copyright © Jakki Francis,(UK), 2005

About the author:
This article is copyrighted. Please feel free to use it in it's entirety including copyright information and information about the publisher. Jakki Francis operates the website

Surprise! Accounting is the Hot New Major

2007-09-25T20:32:00.001-07:00

by: Donna Monday

There was a time when accounting was the boring college major that many people regretted signing up for. A constant barrage of numbers, statistics and spreadsheets was none too interesting.

Boy, have times changed! Thanks to recent accounting scandals by companies like Enron, there is a high demand for accountants and auditors.

According to the Job Outlook 2005 survey, accounting comes out on top as the most in-demand major on college campuses. Forget dot com start ups. Cleaning up a company’s accounting books is what’s in.

But can accounting be sexy?

“All the focus on accounting created a perception to students that accounting matters and is perhaps even sexy,” says Ira Solomon, head of the department of accountancy at the University of Illinois at Urbana-Champaign.

Colleges are scrambling to find more accounting teachers and professors to replace those retiring. Not an easy task, since there are twice as many accounting faculty openings than applicants to fill them.

Here are the top 10 most in-demand college majors as surveyed by the National Association of Colleges and Employers (NACE):

1) Accounting
2) Electrical Engineering
3) Mechanical Engineering
4) Business Administration/Management
5) Economics/Finance
6) Computer Science
7) Computer Engineering
8) Marketing/Marketing Management
9) Chemical Engineering
10) Information Sciences and Systems

If you’re good with numbers and a stickler for details, you might want to consider accounting as a good career choice. However, you’ll probably have to take a number and wait in line behind all those other future accountant hopefuls.

About the author:
***********************
Copyright 2004
Donna Monday writes employment related articles for

Accounting Police: Do They Exist?

2007-09-25T20:31:00.001-07:00

by: John Day

Who created accounting principles? Who sets and revises accounting standards? What if you don’t follow all the rules, do you go to jail? Is there an accounting police force that investigates and arrests violators? It would seem that there must be some regulatory force to make sure that providers of financial statements conform to the rules. There is, up to a point, and here is how it works:

Mainly, it’s all voluntary and it works pretty well. First, double-entry accounting originated in Italy in the 1400’s, so its been around awhile. Accounting principles have evolved over the years just as have accounting standards. The reason why the system works is that the business community could not function if there was not commonality and consistency in financial statement reporting. It would be chaos, much like if there were no driving rules of the road.

Therefore, in the United States, a body of experts known as the Financial Accounting Standards Board (FASB pronounced Fasbee) was established in 1973, which superseded another board called the Accounting Principles Board (APB). The FASB members go through a lengthy process of analyzing and reviewing problems in the accounting field that are brought to them. After much thought, they will make a pronouncement as to what they think the new or revised way of approaching the treatment of an accounting issue should be.

They are a non-governmental organization that has private financing. A big supporter of FASB is the American Institute of Certified Public Accountants (AICPA). Many Certified Public Accountants (CPAs) belong to this prestigious organization and are obligated to abide by its guidelines and principles of behavior. Other countries no doubt have similar organizations that require high levels of accounting professional conduct.

FASB established an accounting code called “Generally Accepted Accounting Principles” or (GAAP). The assumption is that if a business financial statement is prepared according to GAAP, then the user of that financial statement could rely on or trust the information more readily than if not prepared according to GAAP. Those businesses that deviate from GAAP, and many smaller businesses do, cannot say that their statements are prepared under GAAP; in fact, they should inform the reader that they are not. However, let the buyer beware.

One governmental body that has a policing function is the Securities Exchange Commission (SEC). It is primarily concerned with public companies because their job is to protect investors from unscrupulous acts. Recently, the SEC has gotten into the act of establishing accounting standards. It has its hands full today.

Since most businesses use their financial statements to prepare their required income tax returns, the Internal Revenue Service (IRS) may audit those tax returns and review the financial statements upon which the tax returns are based. Not following the rules can get you in trouble with this governmental body.

You can see that in many ways compliance to the principles and standards is a mixture of voluntary and regulatory behavior. Currently, there is an effort underway to set international accounting standards due to the inexorable globalization process. This is a massive undertaking that will take years, but it is obviously necessary and inevitable.