Friday, July 27, 2012

Accounting Framework for Certified Public Accountant (CPA) or Certified Management Accountant (CMA). Revenue Recognition principle, The Matching Principle, Cost-Benefit and Materiality Constraints.

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The accounting profession has been in existence for hundreds of years, and there are numerous services an accountant can perform. These services range from those that are limited in scope to ones that are highly analytical. The rules and guidelines that accountants follow are formulated by regulatory bodies that have a responsibility to the public interest. Business accountants are responsible not only for formulating the annual budget but also for creating financial statements. In addition, accountants who work within hospital systems are responsible for providing financial advice and direction when clinical initiatives are researched and developed.

Often referred to as the "language of business," the accounting field is a vast composition of subject matter that spans numerous industries. A majority of colleges and universities have some type of accounting program that prepares students to take either the certified management accountant (CMA) or certified public accountant (CPA) exam. The undergraduate curriculum begins with understanding the debit and credits that formulate the financial statements and advances into intermediate courses that detail the principles of taxation and auditing. The accounting field is historically separated into either financial or managerial accounting; financial accounting is the preparation of financial statements for external decision makers, while managerial accounting is designed to assist internal users within an organization. Historically, accountants have been categorized as either "tax" or "audit"; however, this classification has evolved due to the increased responsibilities of accountants and the expansion of the certification exams. An accounting professional need not obtain either a CMA or CPA to work in business, but certification could increase compensation.

Many accountants find it difficult to describe their profession to those without financial experience because of the technical nature of the accounting field. It can be a challenge to describe the purpose of an audit or the significance of financial reporting. A broad definition is that accounting is creating structure where there was once disorder so a decision can be made. The disorder can be the various amounts of revenue and expense figures that need to be classified and analyzed. The structure is the numerous financial reports and statements that are formulated, while management represents the decision-making body.

The Financial Accounting Standards Board (FASB) is the highest authority in establishing accounting standards and principles. It is a nongovernmental organization that develops and interprets accounting standards, and the SEC (Securities and Exchange Commission) has delegated this authority to the FASB. There are currently seven full-time FASB members, and they each serve five-year terms. Accountants adhere to generally accepted accounting principles (GAAP) developed and interpreted by the FASB. These GAAP regulations are used to prepare, present, and report financial statements for numerous entities, including not-for-profit organizations. In 2009, the FASB created a Not-for-Profit Advisory Committee (NAC) to obtain input from the various not-for-profit entities regarding how GAAP affects their job duties and financial reporting. This committee also assists the FASB in communicating these matters to the appropriate not-for-profit businesses. The NAC has developed three working groups whose purpose is to develop initiatives and recommendations that can improve the fiscal accountability of not-for-profit operations. The rules and regulations formulated by this committee will most likely have a significant impact on business accounting.

Other countries do not have to adhere to either GAAP or FASB regulations because they have their own internally created standards. An increasing trend within the accounting profession is how to handle accounting issues with the increase of globalization.

The rules and regulations that are contained within GAAP are guided by specific assumptions, principles, and constraints. Unfortunately, it is not feasible to describe all the rules of double-entry accounting; however, an underlying conceptual framework can be discussed. The four primary assumptions of accounting are economic entity, going concern, monetary unit, and periodicity. The economic entity assumption states that the affairs of the officers and managers are separate from those of an entity such as a hospital. The going-concern assumption states that unless otherwise stated each business will continue operating indefinitely, which means that the liquidation values of assets is not important. The monetary unit assumption states that accounting records are best examined when they are reported in terms of money. The final assumption is periodicity, which states that financial information is best reviewed on a periodic basis, such as monthly or quarterly.

In addition to assumptions, there are several principles that are referenced when reporting financial information. The revenue recognition principle determines when sales or gains should be recorded in financial statements. Revenues are recorded when they are realized, realizable, or earned. Realized means that cash has been given, while realizable translates to a receivable being created. Earned occurs when the goods or services have been rendered, which is usually at the time of delivery or sale. The matching principle is a second principle that requires a company to match expenses with related revenues to report a company's profitability during a specified time interval (2). This principle is a critical aspect of accounting because it symbolizes the cause and effect of revenue and expenses. Basically, the expenses that are incurred in one time period must correlate with the revenue that is formulated within that same time period. In other words, the expenses recorded in March must be from the sales made in March. This principle is associated with the periodicity assumption.

Constraints are used within accounting to limit the process of recognition in financial statements. Two constraints that are used in all industries would be the cost-benefit and materiality constraints. The cost-benefit restraint of accounting basically states that the cost of any project or initiative should not exceed its benefits. Materiality is another constraint that is consistently used in accounting, and the basic premise is that something is material if its omission or misstatement could influence a decision maker. The concept of materiality is often used as a threshold within variance analysis and auditing.

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Friday, July 20, 2012

Ten Key Competencies of Personal Productivity

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Ten Key Competencies of Personal Productivity

I identify 10 main factors affecting personal productivity in the workplace. The first letter of each factor spells the word “PRODUCTIVE”:

Preparation

This competency relates to how well you’ve planned and laid the foundation for your daily activities. If you excel in this competency, you are PROACTIVE, rather than REACTIVE. Most people don’t have well-articulated goals. Perhaps you don’t know how to set them. Perhaps writing goals down seems like too much effort, or you simply haven’t taken the time to write them. It’s worth the work to create a plan, because the goals you set will provide direction for your life and focus your activities. You must translate your lofty, long-term goals into actionable tasks you can work on today.

Reduction

This competency has to do with how well you eliminate time wasters in your daily activities. If you excel in this competency, you are ASSERTIVE, rather than PASSIVE in allowing people to dictate your schedule. With a finite amount of time available, if you wanted to get more done, the temptation is to go faster and work more hours. However, productivity is not about squeezing more into your days. You must reduce “speed bumps”—things that waste your time. Speed bumps exist at organizational, departmental, and individual levels. They could include administration, too many meetings, unnecessary levels of bureaucracy, too much red tape, or unclear priorities. YOU can also be a speed bump—the causal factor in wasting precious time.You must eliminate speed bumps, so you can create the space to accomplish the important.

Order

This competency relates to your level of organization. If you excel in this competency, you have SYSTEMS, rather than PILES. You can find what you want, when you want it, in thirty seconds or less. How well do you control the paper, email, reading material, and inputs into and out of your office? Order is your ability to sort, filter, and process this information effectively. It’s how tidy your work areas look, inside and out. Being organized will give you more control over your life and time. You must find the time and the self-control to start achieving more of the things you want to do through proper systems.

Discipline

This competency refers to your ability to maintain consistent, productive behavior. If you excel in this competency, you complete what you MUST do, rather than what you WANT to do. Are you persistent in completing your high priority tasks, without getting sidelined by menial activities? Do you put your nose to the grindstone each day, or do you only work hard when you’re in the mood? Do you have a set of “rules” for yourself that govern your behavior and activity? Everyone
has an “off day.” But if you’re self-disciplined, you exhibit consistent focus in your day-to-day work. Learn to do what needs to be done and exercise restraint over your own impulses, emotions, and desires. Sometimes working on the right thing doesn’t mean doing the fun thing. You must focus on high-value output, as defined by your job requirements, and learn to stop procrastinating.

Unease

This competency refers to your ability to handle stress well, so that it doesn’t impact your performance and productivity. If you excel in this competency, you focus on VALUE, rather than VELOCITY. You’re not running around in a harried frenzy all the time. According to nationwide office productivity study conducted by Xerox and Harris Interactive in 2003, most people work over 60 hours a week total, and over 33 percent work on weekends. The “faster, cheaper, do more with nothing” approach has created a workplace where workers are always in high gear. This work style reduces productivity and increases stress. Stress is also a known factor in 70 percent of all diseases, so people must learn to reduce tension. You must be familiar with stress-reduction strategies, so you can recover when pushed to the limit every day.

Concentration

This competency refers to your ability to stay on target and focus on the task at hand. If you excel in this competency, you are PURPOSEFUL, rather than DISTRACTED. As a child, I remember sitting for hours at a time, absorbed in my favorite books. My mother would enter the living room asking, “Didn’t you hear me call you?” I would look at her, confused, as I came back to reality, and answer honestly, “No, mommy I didn’t.” And that was the complete truth! That level of concentration is very hard to achieve today. With noise, interruptions, instant messages, and email, so many things competing for our attention in the workplace that it’s often very difficult to concentrate. You must be able to achieve a state of “flow” and work without breaking focus.

Time Mastery

This competency relates to how well you manage your activities throughout the day. If you excel in this competency, you focus on QUALITY of your activities, rather than the QUANTITY. Some people spend more time planning their vacations than their time. With good time management comes the rewards of results, recognition, free time, clarify, and focus. Effective time management brings purpose in life, structure to your day, direction, reduced frustration, and a sense of accomplishment. In addition, it reduces stress, since it gives you much more control over your day. You must run your life, rather than allowing your life to run you.

Information Management

This competency relates to how well you handle all the information coming at you. If you excel in this competency, you are DECISIVE, rather than TENTATIVE. We’ve become dependent upon computers, email, voicemail, the Internet, Blackberries, PDAs, cell phones, and pagers. These devices connect us to the world of work. Today, you must be technologically savvy and make choices quickly. You also must choose the best method and medium of communication for the particular message you want to convey. Technology can undoubtedly improve your productivity, but it can make you LESS productive if you’re not careful. You must use the latest technologies to your advantage, without letting technology take advantage of you.

Vitality

This competency refers to your wellness. If you excel in this competency, you TAKE CARE of yourself, rather than IGNORING your physiological needs. How healthy are you? How much energy do you have throughout the day to accomplish the things you want to do? Do you sleep enough? You have the potential to dramatically impact our productivity by paying closer attention to our behaviors around health. In other words, we eat too much, drink too much, don’t exercise enough, work too much, and don’t sleep enough. No wonder some people can’t be productive! Some studies suggest that upwards of 70 percent of doctor visits are prompted by our own choices in these areas. You must practice proper self-care, so that are physically capable of performing at your matchless best.

Equilibrium

This competency refers to the proper mix of activities in your life. If you excel in this competency, you feel BALANCED, rather than UNBALANCED. Balance is tough to achieve, because you have a real commitment to your job and to your family. You love your work life and your personal life, often with equal vigor, and don’t want to give either one up. Professionals find it difficult to participate fully in one arena without sacrificing the other, but successful people know high performance depends on both personal satisfaction and professional achievement. You must practice lifestyle tactics and make the proper choices that help you to work at a realistic level.
The more solidly you feel you demonstrate each one of these competencies, the better the chances that your habits support personal productivity:
§  If you said a resounding, “That’s me!” after each one, you’re probably a Productivity PRO!
§  If you can identify with some but not all of the traits, you may be a “middle of the road” employee, which means you’re not the most productive person, but you’re not the worst. Ouch! Who wants to be average? Really work on kicking it up a notch!
§  If you just shook your head, select one competency every three weeks and work on systematically improving your productivity. 

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