Single Entry and Double Entry Accounting

-
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
Post a Comment

CONTROLLING FOR ORGANIZATIONAL PERFORMANCE

-
What Is Organizational Performance?
Performance is the end result of an activity. Managers are concerned with organizational performance—
the accumulated end results of all the organization’s work processes and activities.
Measures of Organizational Performance
Employees need to see the connection between what they do and the outcomes. The most frequently used
organizational performance measures include organizational productivity, organizational effectiveness, and
industry rankings.
1.  Organizational productivity is the overall output of goods or services produced divided by the inputs needed to generate that output. It’s the management’s job to increase this ratio.
2.  Organizational effectiveness is a measure of how appropriate organizational goals are and how well an organization is achieving those goals.

TOOLS FOR MONITORING AND MEASURING ORGANIZATIONAL PERFORMANCE
Managers might use any of the following types of performance control tools: financial controls, information controls, balanced scorecard approach, or benchmarking best practices approach.
A. Financial Controls.
1.  Traditional Financial Control Measures.
a.  Financial ratios are calculated by taking numbers from the organization’s primary financial statements—the income statement and the balance sheet. The four key categories of financial ratios are as follows.
1)  Liquidity ratios measure an organization’s ability to meet its current debt obligations.
2)  Leverage ratios examine the organization’s use of debt to finance its assets and whether it’s able to meet the interest payments on the debt.
3)  Activity ratios measure how efficiently the firm is using its assets.
4)  Profitability ratios measure how efficiently and effectively the firm is using its assets to generate profits.
b.  We have also discussed budgets as a planning tool. However, budgets are also control
tools. They provide managers with quantitative standards against which to measure and compare actual performance and resource consumption.
2.  Other Financial Control Measures. Managers are using measures such as EVA (economic value added) and MVA (market value added).
a.  Economic value addedis a tool for measuring corporate and divisional performance by calculating after-tax operating profit minus the total annual cost of capital.
b.  Market value added adds a market dimension by measuring the stock market’s estimate of the value of a firm’s past and expected capital investment projects.

B. Information Controls.
Controlling information can be vital to an organization’s success. We need to look at the development and use of management information systems.
1. A management information system is a system that provides managers with needed and usable information on a regular basis.
a.  Managers need usable information, not just data
b.  Data are raw, un-analyzed facts. Information is analyzed and processed data.
2.  Information can help managers control the various organizational areas efficiently and effectively. It plays a vital role in the controlling process.

C.  Balanced Scorecard Approach.
1. The balanced scorecard is a performance measurement tool that looks at four areas—financial, customer, internal processes, and people/innovation/growth assets—that contribute to a company’s performance.
2.  The intent of the balanced scorecard is to emphasize that all of these areas are important to an organization’s success.

D.  Benchmarking of Best Practices
1.  Benchmarking is the search for the best practices among competitors or non-competitors that lead to their superior performance.
2.  Research shows that best practices frequently already exist within an organization, but usually go unidentified and unused.
–  Internal benchmarking best practices program.

Establishing Quality Management Systems
By implementing international quality standards like ISO-9000, European Quality Award, Deming Prize, or Malcolm Baldrige Award; an organization can boost its productivity and quality. This will give leverage for a continuous improvement and consistent quality products for customers and keeping the employees happy as well. One can also adapt TQM philosophy of Deming, Juran or Crosby or Taguchi to outperform their competitors in the global market.

Comments

Post a Comment

Popular posts from this blog

RECORD KEEPING AND SOME BASIC CONCEPTS

-
Image
We can maintain a diary of transactions and note the daily transactions like sale, purchase etc. in it. Problems Faced in Maintaining Diary of Transactions • How will we come to know the income and expenses from various sources? • We only have a sheet / page on which daily transactions are listed. • We do not know which product is selling better and which is not. Available Alternate One can go through all the transactions at the end of the month and note different types of transactions on different pages. So that every page gives complete detail for a different type of transaction like sales of different products and expenses of different types now try to go through these transactions and separate transactions of different types.   But what if the number of transactions is large? Is it really possible to go through hundreds or thousands of transactions at the month end and analyse them to obtain required results.  Sales and purchase are not always for cash. Some ti
Read more

Single Entry and Double Entry Accounting

-
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
Read more

Money Measurement Concept

-
In accounting, every transaction that is worth recording is recorded in terms of money. In other words any event or item that cannot be translated in terms of money is not recorded in books of accounts.   With the passage of time, the trading volumes and types of commodities available in the market are increased and it became difficult to exchange commodity with other commodity. That is why the concept of cash / money is introduced and people started valuing all goods / services in terms of a common commodity called money. Now the price of 10 kg wheat would be Rupees 60 instead of 2 meters of cloth. Similarly, the price of 2 meters of cloth and 5 litres of milk would also be Rupees 60.
Read more