Single Entry and Double Entry Accounting

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Single entry accounting/Cash accounting. This system records only cash movement of transactions and that too up to the extent of recording one aspect of the transactions. This means that only receipt or payment of cash is recorded and no separate record is maintained (about the source of receipt and payment) as to from whom the cash was received or to whom it was paid. Double entry book keeping/Commercial accounting. Double entry or commercial accounting system records both aspects of transaction i.e. receipt or payment and source of receipt or payment. It also records credit transactions i.e. recording of Electricity Bill or accruals of Salary payment etc. This concept will be explained in detail in the next lectures but for the time being it should be noted that in cash accounting date of receipt / payment of actual cash is important while in commercial accounting the date on which the expense is caused (whether paid or not) as well as the spreading of the cost of c
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CONTROLLING AS A MANAGEMENT FUNCTION II

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Control as a management process
A.  Controlling,one of the four major functions of POLCA management, is the process of regulating organizational activities so that actual performance conforms to expected organizational standards and goals.  1.  Controlling is largely geared to ensuring that the behavior of individuals in the organization contributes to reaching organizational goals.
2.  Controls encourage wanted behaviors and discourage unwanted behaviors.

B.  A control system is a set of mechanisms that are designed to increase the probability of meeting organizational standards and goals.
 
C.  Controls can play five important roles in organizations.
1.  Control systems enable managers to cope with uncertainty by monitoring the specific activities and reacting quickly to significant changes in the environment.
2.  Controls help managers detect undesirable irregularities, such as product defects, cost overruns, or rising personnel turnover.
3.  Controls alert managers to possible opportunities by highlighting situations in which things are going better than expected.
4.  Controls enable managers to handle complex situations by enhancing coordination within large organizations.
5.  Controls can decentralize authority by enabling managers to encourage decision making at lower levels in the organization while still remaining in control.

D.  Control responsibilities differ according to managerial level.
1.  Strategic control involves monitoring critical environmental factors that could affect the viability of strategic plans, assessing the effects of organizational strategic actions, and ensuring that strategic plans are implemented as intended.
a.  Strategic control is typically the domain of top-level managers who must insure core competencies are developed and maintained.
b.  Long time frames are involved, although shorter time frames may be appropriate in turbulent environments.

2.  Tactical control focuses on assessing the implementation of tactical plans at departmental levels, monitoring associated periodic results, and taking corrective action as necessary.
a.  Tactical control is primarily under the direction of middle managers, but top-level managers may at times get involved.
b.  Time frames are periodic, involving weekly or monthly reporting cycles.
c.  Tactical control involves department-level objectives programs, and budgets.

3.  Operational control involves overseeing the implementation of operating plans, monitoring day-to-day results, and taking corrective action when required.
a.  Operational control is the responsibility of lower-level managers.
b.  Control is a day-to-day process.
c.  The concern is with schedules, budgets, rules, and specific outputs of individuals.
4.  For controls and three levels to be effective they must operate in concert with one another.

The Control Process
A.  The basic process used in controlling has several major steps.
1.  Determine areas to control.
a.  It is impractical, if not impossible, to control every aspect of an organization’s activities.
b.  Major controls are based on the organizational goals and objectives developed during the planning process.

2. Develop standards spelling out specific criteria for evaluating performance and related employee behaviors.
a.  Standards are often incorporated into the objectives set in the planning process.
b.  Standards serve three main purposes related to employee behavior.
1)  Standards help employee understand what is expected and how their work will be evaluated.
2)  Standards provide a basis for detecting job difficulties that are related to personal limitations of organization members.
3)  Standards help reduce the potential negative effects of goal incongruence, a condition in which there are major incompatibilities between the goals of an organization member and those of the organization.

3. Make a decision about how and how often to measure performance related to a given standard. 
a. MBO is a popular technique for coordinating the measurement of performance throughout an organization.
b.  The means of measuring performance depends upon the performance standards that have been set, as well as data, such as units produced, quality of output, or profits.
c.  Most organizations use combinations of both quantitative and qualitative performance measures.
d.  The period of measurement usually depends upon
1)  The importance of the goal to the organization
2)  How quickly the situation is likely to change
3)  The difficulty and expense of rectifying a problem if one were to occur

4.  Compare performance against standards.
a.  Reports that summarize planned versus actual results are often developed.
b.  Management by exception is a control principle which suggests that managers should be informed of a situation only if control data show a significant deviation from standards.
c.  Mangers may compare performance and standards through personal observation.
d.  The 360-degree feedback system described in chapter 10 is being used by a number of organizations as an evaluation approach.

5.  Recognize above-standard performance both to give precognition to top performing employees and also to aid improving performance on regular bases.
 
6.  Assess the reason why standards are not met, and take corrective action.
 
7.  Adjust standards and measures as necessary.
a.  Standards and measures need to be checked for relevance.
b.  Managers must decide whether the cost of meeting certain standards is worth the resources consumed.
c.  Exceeding a standard may signal opportunities, the potential to raise standards, and/or the need for possible adjustments in organizational plans.

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