5 Reasons Why Principles of Accounts

this is the closest Creative Commons Licensed Picture I could find! You just finished your final year examinations and are considering your options. The familiar arts (history, literature or geography) and science  (biology, physics and chemistry)

Principles of Accounts (POA) sounds so foreign and you’ have heard from friends that it is boring. But there’s more to debits and credits in POA.

 

“’Double-entry bookkeeping’ is one of the great discoveries of European civilisation, but five centuries later most people are still muddled about assets and liabilities. Without such knowledge, technical terms like ‘balance-sheet recession’ and ‘rebuilding balance sheet’ are meaningless.” – Robert Skidelsky, member of British House of Lords and Professor Emeritus of political economy at Warwick University* 

Here’s 5 Reasons Why You Should Pick Up POA:

1. Importance of Accounting
2. Valuable Skill for Daily Life
3. Accounting as a Career
4. Dollars and Sense
5. Taking it further – Upward Mobility

1. Importance of Accounting

Accountants are responsible for providing information that is used to determine the present and future economic stability of the organisation. Bosses depend on them to make business more profitable, investors make decisions using accounting information, government tax on the profits and employees read them to find out if they get their bonuses.

2. Valuable Skill for Daily Life

While subjects like geography are interesting, there may be very little opportunities for you to be able to differentiate one rock from another. signContract

Accounting, however, is different. It is a lifeskill;

Whether in budgeting for the groceries, writing cheques, running a blogshop, understanding contracts or with knowing your bank /CPF statements, the ability to read numbers and make a story out of them makes accounting skills something very valuable.

Principles of Accounts in Personal Finance & Investment

Accounting skills becomes essential if you want to be on your way to a stable and growing level of wealth. You will be able track your net worth, manage household expenses, budget for holidays, set up a home-based business and follow on investments (e.g reading company annual reports).  Accounting can also be used to assess interest rates on house mortgages and car payments.

3. Accounting as a Career

Accounting is the language of business. Today, more CEOs are armed with accounting degrees than any other area of study.  Career opportunities associated with a degree in accounting are practically endless due to how broad the subject is.  Jobs where accounting skills are valued include:

Accountant
Actuaries
Auditors
Brokerage Clerks
Budget Analysts
Claims Adjusters, Appraisers, Examiners, and Investigators
Certified Public Accountants
Credit Analysis
Debt Counselors
Economists
Financial Analysts
Financial Managers
Financial Services Sales Agents
Insurance Sales Agents
Insurance / Reinsurance Underwriters
Loan Officers
Personal Financial Advisors
Securities and Commodities Sales Agents
Tax Inspectors, Collectors and Revenue Agents

The “Iron Rice Bowl”

Another reason college students should consider studying accounting is the condition of the economy.  Whether the economy grows or weakens, businesses always need for someone to calculate the profits or the losses. In economic downturns, businesses need to cut down on costs to make their business more profitable.  Businesses also need a strict set of internal controls to make their business more efficient.  The only way to ensure that both of these can happen is through stringent accounting.

4. Dollars and Sense

Job opportunities are not the only reason that university students should consider accounting.  The job can be financially rewarding.  The starting salary of a local accounting graduate averages S$2,600. Good performers can expect an average of S$450 increment in his salary every year.

A partner of a large accounting firm can expect to receive an annual salary of slightly less than S$1 million. This salary, of course, can change based on company, location and industry.

According to Ambition’s 2009 Market Trends and Salaries Report, the Heads of Accounting departments take home salaries in the range of $100,000 – $500,000, excluding performance bonuses, stock option and other allowances.

Accountant Salary Table

5. Taking it further – Upward Mobility

An accounting degree course uses the very same principles you learn in your GCE O/N’ levels POA. It is also not an exaggeration to say you can work as a bookkeeper after your O’/N’ level exams. An accounting degree, however, means you’ll have access to better jobs and more opportunities to advance your career than someone who’s trying to make it in the field without one. With proper training, you can find a worthy entry-level position and step up to greater positions in the future. A skilled accountant is valued in large organisations. Many influential individuals in large organisations are qualified accountants and contribute positively to their communities.

We love to hear from you!

Share your experience and thoughts with us!  Your sharing will allow readers to benefit.  Questions on accounting education? Contact me here. I do my best to help.

—–

*quoted from “The Price of Clarity,” published 24 May 2010 by The Straits Times, Singapore.

 

Read More:

7 Reasons For Becoming An Accountant And Not A Fashion Designer – by Herald de Paris et Cie

Image Credits

5 reasons why accountancy—1953

What is the difference between Net Book Value (NBV) and Net Realisable Value (NRV)?

The Net Book Value (NBV), also known as depreciated cost, is equal to its original cost (its book value) less amortisation (not in O’/N’ level syllabus) and depreciation.
Closing Stock

On the other hand, the Net Realisable Value (NRV) refers to the selling price of an asset minus the expenses incurred in the sales transaction, and in bringing the asset to the saleable state. NRV is most often used when the value of stock is less than the its historical cost.

Note on Net Realisable Value
In the examination where both the cost of purchase and the NRV (or market value) of the stock is available, use the figure that is lower. The fancy way of saying it is the ‘lower of cost or market value’ rule.
This follows the accounting principle of prudence and conservatism, where assets are not overstated and liabilities not understated.

Image Credit:

Inventory

Track Your Numbers to Meet Your Business Goals!

[From Caleb: Today, Adam Khoo shares about tracking your accounting figures to meet your business goals. Just last month, he wrote about why expats will rule Singapore and why money is the lifeblood of business.

This post is written for business owners and aspirant. Start ups are usually drowned in the excitement of entreprenuer work. Keeping an eagle’s eye on financial figures is essential business success.

Notice how Adam’s tips are succintly practical: They’re very similar to most startup advice about watching cashflow and setting performance measurements. It is the intensity from this logical step that really make you think about the scale of his business success.

Stay tuned this week for something cool]

***

Your financial figures tell you whether your business is on track at meeting its goals. If you don’t pay attention to it constantly, your business could be going off track and by the time you figure
it out, it would be too late!

Here are some of the most common scenarios that happen to startup companies. By not tracking his expenses closely, the business owner is not aware that his costs are actually overshooting his budgeted amount.

By the end of the year, he finds that he has actually been making a loss! If he had known this fact immediately, he could have taken steps to reduce his costs and turn around a profit. Another common example is that the business owner is not aware that sales revenue is not coming in as projected. As a result, he will again find himself making a loss at the end of the year.

Business GraphWhat has made my company so successful at hitting its sales and profit targets every year is that we track our sales figures by the hour! The moment sales are made at our payment counter, an SMS is sent to my CEO and the product manager within an hour.

By the next three hours, the sales figures are updated in our computer’s accounting system. My CEO then studies the consolidated report of the entire sales revenue generated by all the product
divisions weekly. The moment our sales revenue drops below our projected target for that week, we will immediately change our strategy and take new actions.

We may place more advertisements, create new marketing channels, offer a special promotion, push our sales people harder, increase telemarketing efforts and do whatever it takes to push up the figures!

To your business success,
Adam

 

AdamKhooPhoto.jpgAdam Khoo is an entrepreneur, a best-selling author and a peak performance trainer. A self-made millionaire by the age of 26, he owns and runs several businesses in education, training, event management and advertising, all with a combined annual turnover of $20 million. His best-selling “Secrets of Building Multi-Million Dollar Businesses” is a complete step-by-step system that will show you how to take an indea from start-up to a million dollar business in 18 months flat. This article is reproduced with permission from Adam Khoo Learning Techology Group.

photo credit: Business Graph by nDevilTV

Syllabus for Singapore’s Cambridge- GCE Principles of Accounts Examinations

Even the most seasoned tutors may go out of sync sometimes. In 2008, the Singapore Examinations And Assessment Board removed multiple choice questions from POA Paper 1, replacing them with structured questions – to the misery of my then-students.

This blog post contains the latest syllabus for Principles of Accounts at N’/O’ and A’ Levels. To save a copy, right click and select “Save Target As.”

7091 GCE N’ Levels Principles of Accounts Syllabus

7092 GCE O’ Levels Principles of Accounts Syllabus

9755 GCE A’ Levels H2 Principles of Accounts Syllabus

Be sure to visit the Singapore Examinations And Assessment Board’s website at http://www.seab.gov.sg/index.html for any updates on the syllabus.

Money Is The Lifeblood of Your Business!

[Caleb Ho] Adam Khoo is Singapore’s most well-known personal development trainer and entrepreneur extraordinaire. A a self-made millionaire at age 26, Adam shares the secret of building multi-million dollar businesses.

A business without enough money is like a human being without blood or a jet plane without fuel. It is an essential resource your business needs in order to achieve its fullest potential.

You can have the best ideas, a bunch of talented people, a great product and a potential market. However, without proper money management, none of your goals can materialize. I have seen entrepreneurs doing great work, attracting lots of customers and delivering great value.

Moreever, because there was nobody paying close attention to the numbers, the business soon found itself having to close down. All this could have been avoided if only the business owner understood and paid more attention to managing the cash flow of the company.

So, if money is such an important matter in a business, why do so many entrepreneurs neglect to spend enough time on it? There are three main reasons:

1) Ignorant About Money
Unfortunately, very few people are trained in money management. Unless you studied finance or accounting in college, it is unlikely that you would have learnt about smart money management strategies from your parents or from school, college or university.

2) Fear of Money
With ignorance comes a fear of dealing with money. Many business owners I talk to have a fear of constantly tracking their sales revenue, costs and other financial numbers.
They get stressed up when they have to look at and deal with numbers. They get nervous when they see the bills that come in and more stressed when the sales revenue is not as rosy as projected.

“I was never good at Math,” is the common excuse they usually give.

3) Procrastination
Finally, many business owners I know tend to place their finance and accounting matters as the last priority. They are always focused on making the product, providing the service, dealing with
customers, selling their company or managing their people. “I have no time to do the books.” “I’ll do it later!”

As a result, their accounts are never up to date. They will only know their May sales, cost and profit figures in September! It is like a basketball team playing a match without being able to see the scoreboard until two weeks after the game!

To your business success,
Adam

AdamKhooPhoto.jpgAdam Khoo is an entrepreneur, a best-selling author and a peak performance trainer. A self-made millionaire by the age of 26, he owns and runs several businesses in education, training, event management and advertising, all with a combined annual turnover of $20 million. His best-selling “Secrets of Building Multi-Million Dollar Businesses” is a complete step-by-step system that will show you how to take an indea from start-up to a million dollar business in 18 months flat. This article is reproduced with permission from Adam Khoo Learning Techology Group.

The Imprest System

The Imprest System is a system for controlling petty cash. The person petty cashier is given an amount in advance of expenditure. This amount also known as the “float.”
cashbox

Under the Imprest system, the chief cashier replenishes the cash such that the petty cash box always has the same amount of float at the start of each period. Each disbursement paid out from the float must be supported by a petty cash voucher and issued by an authorized person.
Advantages of the Imprest System of keeping petty cash
The Petty Cash Book is used to record small payments. Such payments include postage, reimbursement to employees for small purchases of office supplies and numerous similar items.

The advantages of using a petty cash book are as follows:
1.    Practicality – small amounts do not require cheque payments
2.    Flexibility – size of float can be adjusted to business needs
3.    Accountability – a junior staff can be responsible for the petty cash
4.    Control  over:
a.    Mistakes – the chief cashier checks the Cash Book regularly
b.    Petty expenses – expenses keep within certain dollar limits imposed by the system
c.    Theft/ fraud – misappropriation cannot exceed the Imprest cash amount.
A petty cash system begins when a cheque is cashed and the cash is placed in a petty cash box.

Accounting Concepts

i.    Accounting/Business entity

The business is an entity (or body) separate from its owner. Entity means a distinctive existence.

ii.    Consistency
The accounting treatment applied to an item should be the same for all accounting periods, unless there is a valid reason for change and the effect of such changes are disclosed. This is to enable meaningful comparisons between two or more accounting periods to be made.

iii.    Accounting period

Assuming that the business is a going concern, the life span of a business entity is divided into fixed periods of time to enable financial reports to be prepared for that particular period.

iv.    Accrual concept
Revenue is recognized when earned and expenses when incurred. Revenue received (or expenses paid) but not yet earned (incurred) cannot be recognized.

v.    Duality concept
This is the concept at the heart of the system in accounting known as “double entry system” (see Chapter 3). It relies on the fact that each transaction represents an exchange of resources, and hence there will be two equal and opposite aspects to each accounting record.

vi.    Going concern concept
It is assumed that the business will continue to operate for an indefinite period of time. Thus, assets are valued at historical cost rather than market or saleable value.

vii.    Historical cost concept
All business transactions are recorded at the cost at the time it took place.

viii.    Matching principle
The appropriate expenses should be matched to all the revenue to determine profits in a given accounting period.

Monetary Conceptphoto credit: AMagill

ix.    Monetary assumption or money measurement
Only transactions quantifiable/ expressed in monetary terms are recorded

x.    Materiality concept
How each transaction is captured and dealt with in the accounting records depends on its significance and impact.

xi.    Objectivity convention
The methods used to prepare financial reports should be free from personal bias and based on verifiable evidence.

xii.    Prudence/ Conservatism convention
Given two alternatives of reporting an item, the alternative which gives a lower profit or lower asset value should be chosen to avoid overstating assets or understating liabilities.

xiii.    Realization concept
Revenue/Income should be recognized when it is earned and expenses when incurred.

Accountants’ Salary Guide 2010 by ICPAS & Partners Robert Half

ICPAS has partnered with Robert Half International to launch the 2009/2010 Global Financial Salary Guide.

[Download Here]

According to the Global Financial Salary Guide 2009/2010 and inaugural Asia Pacific Banking & Financial Services Salary Guide 2009/2010, salary levels of finance and accounting professionals are holding steady in 2009 and 2010 while demand for banking and finance talent remain strong in Asia Pacific despite ongoing economic challenges, Launched by Robert Half International (“Robert Half”), these salary guides offer interesting insights into the hiring environment and average salaries for finance professionals globally and in Singapore.

The Global Financial Salary Guide 2009/2010 provides data on starting salaries for finance and accounting professionals. Currently in its third year of publication, this guide is launched by Robert Half in partnership with the Institute of Certified Public Accountants of Singapore (“ICPAS”) for the second year running. According to the guide, average salaries for finance and accounting professionals in 2009/2010 remain comparable to that in 2008/2009, in spite of harsher economic conditions. This underscores the heightened importance of finance and accounting roles today, triggered by a renewed emphasis on financial management and cost control in light of the collapse of major financial systems, which led to the global economic meltdown over the past year.

In Singapore, certain accounting positions are seeing slight increases in salary levels, including the roles of Chief Accountant, Internal Auditor and Assistant Accountant with three to five years of industry experience. Increasingly stringent financial regulatory and compliance standards have given rise to the need for more rigorous audit and accounting practices. The trend towards standardised accounting and reporting systems has also led to a higher demand for audit and accounting professionals.

Said Dr Ernest Kan, President of Institute of Certified Public Accountants of Singapore (ICPAS), “We are happy to partner Robert Half again on the global salary guide, which serves as a fundamental guide for the recruitment of accountants in the current economy. With calls for greater accountability and transparency in financial reporting from authorities and stakeholders alike, companies are requiring more competent candidates to effectively manage their finances and business risks as well as optimise costs and processes. The guide serves to underscore the fact that demand for audit and accounting expertise, typically from qualified accountants like CPAs Singapore, is now greater than ever.”

Agreed Mr Tim Hird, Managing Director of Robert Half Singapore, “While it is interesting to note that salary levels of finance professionals are bucking the economic trend, this is in fact a simple function of market demand and supply. As organisations continue to grapple with the challenges of the downturn, the increasing need for highly skilled finance and accounting professionals have lent stability to salary levels for these roles. However, while demand for these talent remains strong, many employees are hesitant to leave their jobs in this current market, preferring to take a risk-averse approach to their job searches. This has created a distinct supply gap, even in these difficult times.”

These views resonate with the data from the inaugural Asia Pacific Banking & Financial Services Salary Guide 2009/2010, which provides insights into the recruitment competitive landscape and job prospects for banking and financial services professionals in the region.

In Asia Pacific, employers continue to be cautious about recruitment decisions. With decreased access to credit, businesses are focusing more on cost reduction and short term hiring measures. Project-based and temporary roles are gaining popularity as companies seek to ensure completion of work on lower budgets and without significant additions to permanent headcount. Contract staffing is particularly preferred for the flexibility it provides. The impact of hire and departure on staff morale is also lower compared to permanent job losses when the time comes for temporary staff to leave the company.

In Singapore, the key hiring trend is that of steady optimism. Financial services institutions are still hiring, albeit at slower rates than prior to the global economic downturn. Companies remain cautiously optimistic of their prospects, with a desire to gain a competitive advantage during these tougher times. In particular, small-medium enterprises are focused on growing by expanding their front office teams, accessing a pool of top finance talent previously inaccessible but now made available to them due to redundancies and prolonged hiring freezes at larger banks.

Back office functions are also in demand as larger multinational companies move their operations to Singapore from higher cost regions. With more bank mergers, opportunities for project-based integration work across finance, operations, risk and technology functions are on the rise.

Similar trends are present elsewhere in the region. In Australia, companies are seeing a talent shortage in finance and accounting due to lower hiring confidence levels and employees’ reluctance to change jobs. Hiring and job hunting in Hong Kong have also become more selective, even as firms become more upbeat about growth amid the downturn. The situation in Japan is slightly different: while layoffs in Japanese firms have remained low due to Japan’s corporate culture, there is greater emphasis on bottom-lines and employees are now more accountable for their contributions to corporate growth.

Companies typically go through four key employment stages when coping with a recession, observed Mr Hird. Firstly, non-critical contracting employees are released. Secondly, headcount for permanent and fulltime roles is frozen, followed by a reduction in existing headcount. Finally, contract workers are rehired when the economy recovers and business stabilises. This reflects the tremendous potential of temporary and contract positions as viable options for candidates in a tighter job market. For businesses, contract staffing brings about potential cost savings, new skills and abilities, greater flexibility in the workforce, and acts as a manpower supplement during peak periods.

Added Mr Hird, “As the both Salary Guides reveal, finance professionals with specialised skill-sets remain well sought-after by businesses, with particular hiring interests in the areas of internal audit, operational risk, credit risk, compliance and financial governance, and mainstream financial and management accounting.”

“We are heartened that employers recognise the necessity to retain their best talents, who will be instrumental in taking businesses to the next phase when the market turns. This also reflects that highly qualified talents with relevant skills will always be in demand, regardless of the economic and job market conditions. At the same time, it would serve finance and accounting job candidates well to fully utilise available market knowledge and resources, such as Robert Half’s salary guides, to remain updated about their options and make well-informed choices to thrive in the market”, Mr Hird concluded.

The third Robert Half Global Financial Salary Guide 2009/2010 provides comprehensive research data on average starting salaries for 16 key accounting and finance positions across 21 countries, spanning Singapore, Australia, Austria, Belgium, Brazil, Canada, Czech Republic, France, Germany, Hong Kong, Italy, Ireland, Japan, Luxembourg, Netherlands, New Zealand, Spain, Switzerland, United Arab Emirates (Dubai), United Kingdom and the United States. This annual guide aims to help both companies and employees make better employment and hiring strategies through a comparative salary guide across these countries in the country’s corresponding currency value. The information provided is based on extensive research from global job placements by Robert Half, ongoing surveys of senior executives, and the accumulated expertise of Robert Half’s staffing professionals worldwide.

Difference Between Bank Loan and Bank Overdraft

Do you like Sing Dollar

Bank loan

Refers to capital borrowed from the bank. This tends to be more expensive than an overdraft. The difference between a bank loan and a bank overdraft is that a loan is granted for a specific period (say, two years), usually at a set rate of interest (that is, it doesn’t vary when bank base rates vary). A bank loan is shown on the balance sheet as a long-term liability.

Interest on the loan is recorded as an expense on the Profit and Loss Account. Any capital repayments will reduce the long-term liability on the balance sheet. Short term borrowing to help fund a temporary shortage of funds is more likely to involve a bank overdraft.

Bank overdraft

For the business, a bank overdraft is essentially short term borrowing, intended to tide the business over temporarily. Very often, the overdraft is not for a specific amount of money, but the business is given a maximum level of cash it may draw against the overdraft. A business should arrange overdraft facilities to ensure that the bank will honor cheques even though there are insufficient funds in the account to cover the value of cheques drawn.

The overdraft is repayable on demand, although it is usual to agree with the bank the period for which the overdraft is required. It has the advantage that interest accrues from day to day only on the balance outstanding and it follows the flat rate of interest. A bank overdraft is shown on the balance sheet as a short-term liability.


Have A Question?

I’ll be more than happy to help. Use the button below to reach me. While I can’t promise to answer every question, I’ll try to use your question in a future blog post or newsletter.  Thanks!  – Caleb

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Difference between Carriage Inwards and Carriage Outwards?

 

carriage inwards or outwards Carriage refers to the costs of transporting goods to and from the firm. In the past, the purchase of goods would often result in two charges – the cost of the goods purchased and the cost of having them delivered to the business premises.

From the buyer’s point of view, the delivery charge would he referred to as “carriage inwards”. Any such carriage charges should be debited to the carriage inwards account in the general ledger.

The carriage inwards account is written off to the trading account at the end of the accounting period.

When the buyer sells the goods to his customer, he incurs further delivery charges. This cost is referred to as ‘carriage outwards”.  This costs are debited to the carriage outwards account in the general ledger.

Any carriage outwards charges are usually included in an item called ‘selling and distribution costs”.   Since this cost is incurred after the goods have been made ready for sale, the account is written off to the profit and loss account at the end of the accounting period.

Each type of carriage will be an expense and therefore will have a debit balance in the trial balance. However, these will appear in different sections of the trading and profit and loss account.

Accounting Treatment of Carriage Inwards and Carriage Outwards

 

Carriage Outwards 

Journal  Entry for Carriage Inwards:

Debit   Carriage Inwards

Credit    Bank

Journal  Entry for Carriage Outwards:

Debit   Carriage Outwards

Credit    Bank

Treatment in Trading, Profit and Loss Accounts:

Carriage inwards Trading account expense
Carriage outwards Profit & loss account expense

Summary:

Carriage inwards is connected with the cost of getting goods into the business and ready for sale. As a result, it will be added on in the calculation for the cost of goods sold. Carriage outwards does not have anything to do with the cost of getting goods into saleable condition. Therefore it will appear with all the other overhead expenses and the profit and loss account.

Good to know:

Nowadays, the price quoted for goods being purchased will usually be inclusive of any delivery charge, and so a separate charge for carriage inwards (or outwards) is not very common. In cases where separate carriage inwards charges are incurred, the cost should be added on to the cost of purchases in the trading account. Consequently, a proportion of carriage inwards charges should be added to the purchase cost when determining the cost of closing stock.

 

Image courtesy of dok1 and Batman Comic Generator