Account for the Business to Eliminate the Accounting Problem

Accounting is part of one of the top 10 problems of 20^th century enterprise management

A chart of accounts is laid over the business, rather than recording the actual business

20^th century management historically has separated cash from other capital to be managed in financial management and to be accrued and recorded through accounting. The need for the separation has decreased due to technology and advanced solutions. Technology has also led to high-worth information and intellectual capital that needs to be accounted for and managed. But the separate focus on cash tends to prevent other capital of worth from being managed professionally. Capital and cash transactions that are recorded are recorded against a contrived chart of accounts, rather than accurately recording the complete financial status of the actual business.

Establish facility records capital to professionally record the actual business

The business organizes all capital, including currently undefined capital and “intangible assets”. The business manages accounts and other records of the business as facility records capital and provides capital solutions from records as information capital. Facility records are the tangible information capital of the enterprise. Facility records go beyond the limitations of accounting to record:

• Financial records for the full business cycle, including fundamental business data on performance costs, result value, and capital worth
• Non-financial records for statistical, documentation, images, and other records

Business management broadens 20^th century accounting to professional records management to keep records on the actual business and to make records solutions available to produce high-value results.

The Accounting Problem

Accounting does not record the actual business

Due to 20^th century management problem number one, the business is not organized. Therefore, accounts are not maintained on the business, but are maintained against a chart of accounts laid over the business. Some aspects of accounting, like double-entry bookkeeping and accruals are useful, and basic reports are necessary. But, historic accounting prevents comprehensive financial and non-financial record capital management, thus becoming major problem in 20^th century enterprise management.

Accounting is equated with record keeping but does not keep full enterprise records

One problem is that accounting is equated with record keeping. The modern enterprise must maintain records capital on business reality for the full business cycle including financial, statistical, qualitative, documentation, and imaged records. All records involve money and protection of enterprise assets. But, accounting restricts itself to conventional financial records. kept in accordance with accounting principles and external audit requirements, that may distort the business accuracy. Many important management records are not kept, or are kept by organization units and individuals and not managed as enterprise capital of worth to produce result value. Records relate to the organization, account, performance management, business process, or other structure laid over the business and do not not relate to the business.

Accounting does not maintain full financial records

Financial records that should be kept are not kept, because accounting only records the part of the business cycle from the point money is received as cash or accruals up to the point that money is invested or spent. The input result value received for money invested or spent, the performance cost in transforming input results to output results, the value added in the transformation, and the value provided for money received is on the dark side of accounting, where few financial records are kept. Accounts are kept against contrived entities like centers, activities, and objects and do not relate to manageable business entities.
Other financial records that should be kept on much high-worth capital are not kept. The capital is not managed and much is labeled “intangible”, allowing accounting to ignore it and not account for its worth as a part of enterprise worth or the cost of utilizing the capital as a part of enterprise performance costs.

Accounting has not addressed many on-going 20^th century financial record problems

Many unsolvable financial record problems like intangible assets, unknown costs, unsubstantiated value, distorted capital worth, unknown returns on capital investments, insufficient and inaccurate management information, and ill-informed corporate governance are outgrowths of 20^th century accounting. These problems can be eliminated by professionally managing the financial records of the business.

Yet these problems continue, despite the enormous sums spent to strengthen accounting and auditing and to impose more stringent and costly reporting requirements on corporations.

The Accounting Solution

The business organizes investments in capital as solutions of worth utilized for cost and effectiveness of performance to produce value and quality in results and records capital solutions, performance, and results as the basis for professional records management. The business is simplified to only a few other data entities, such as enterprises, business descriptors, and time periods, so many of the requirements of conventional accounting are not required for 21^st century business management.

The actual business is recorded, not contrived codes or structures

All costs, values, worth, and other recorded attributes, by defined time periods, are related to only two entities; results, for all enterprise inputs and outputs, and capital solutions, for all acquired, developed, and utilized capital resources. Capital is utilized in a performance domain to produce a result. Records are required on only a few other entities like time periods, business descriptors, and enterprises in suppliers, who provide input results, business partners, who provide solutions that produce results, and customers, who impart value on final results for their input results or capital solutions. Programs and projects are defined as an investment result and managed as a separate business structure under the final program or project result.

The business structure is maintained as business organization capital. Professional facility records management uses the business structure to record all actual business performance for result value, performance costs, and capital worth, including cash and accruals, for the complete enterprise.

Journal entries are generated each time there is a change to a result or capital solution and each time a volume of full or partial results are produced. The journal entries record full investment costs for each capital solution implemented, result value the customer is willing to pay for new or revalued results, performance costs and effectiveness for each capital solution utilized to produce a result; result value created and value added over performance costs; attributed result value and value-added for each capital solution utilized for return and gain on the capital investment; and updated capital worth over the remaining life of the solution for changes in the value of a result produced by the solution.

Business balance sheets report complete business net worth for all capital utilized as assets for capital solutions of positive worth and liabilities for capital solutions of negative worth. The business income statement reports revenue and income results less performance costs in accrued cash expenditures. The cash profit result can be compared against result value-added produced across the business for the reported time period.

Information capital is managed as business data, human knowledge, facility records, and management intelligence

Information capital includes human knowledge to support human capability to utilize solutions and produce results; business data to describe solutions utilized and results produced; facility records to record and document tangible information capital in each result produced and capital solution utilized; and management intelligence to analyze business data and facility records for product, customer, business, market, competitive, and management information.

A professionally-managed facility records capital unit is implemented to produce comprehensive facility record results, including financial, cost, and statistical accounting results. Management accounting analyzes facility records as part of management intelligence capital.

Facility records are managed to produce high-worth solutions to produce high-value results

Records management is attractive to people who want to understand and record the business. The objective of facility records management is not administrative performance. The objective is to produce facility record results that develop facility records capital to document the undistorted business reality of the enterprise, provide record information solutions needed to produce other enterprise results, and manage the up-to-date official record capital of the enterprise. Facility records capital produces solutions for management to report the complete and accurate status of the business at any point in time against business plans.

Facility records include all financial and non-financial records

Facility records management responsibilities include all results metrics, capital measures, and performance indicators including financial accounting, performance cost accounting, result evaluations, capital worth assessment, statistical accounting, and qualitative recording. Facility records include all documentation related to results produced and solutions developed; substantiation of results; and archiving of result and capital records. Records can be documents, images, computer records, or any form.

Facility records management includes the financial records sub-set. Facility records are maintained on all capital solution investments in the business to know full investment costs by solution to be amortized as performance costs over the life of the solution. Facility records are maintained for the full business cycle, in the value of results produced and the performance cost of capital consumed. Facility records are updated by business transactions generated each time a volume of results is produced to update performance domain (result, capital solution) records for performance costs, result records for result value created and value added over costs, and capital solutions for value-added return on investment to date and remaining capital worth in future result value.

Facility records solutions are part of the business information base

Facility records solutions are enterprise information capital and form part of the enterprise business information base. Facility records must reference a business data entity and be integrated with other information capital for data, knowledge, and intelligence. Records solutions can be created from data, or intelligence and provide information used to capture data, create knowledge, gain intelligence, and assess the worth of capital on-hand. Facility record solutions are integrated with or accessed through business data to produce specific results, particularly senior-management and board-level corporate-governance results.

The business provides the structure for professional records management

The business provides the structure for 21^st century professional records management. Accounting results are a set within financial record results, which in turn are a set within facility record results. Accountants have the opportunity to broaden to professional records management to maintain facility record capital and to provide facility records solutions to all levels of management to produce enterprise results.

Until accounting regulations are changed, 21^st century business management will have to include special provisions for 20^th century accounting. Changing accounting is up to professional and regulatory bodies. The accounting profession should embrace business management to account for the complete actual business and provide professional records solutions in 21^st century management

Result-performance Management (R-pM) provides the knowledge and procedures for actual business management and reporting

Result-performance Management (R-pM) is the only source of knowledge and expertise on how to manage the actual business. Forward-looking enterprises are now using R-pM guidance to organize and manage their business to gain breakthrough advantages over competitors burdened by unsolvable 20^th century management problems. Business management is explained and documented in the Business Management Toolkit. The Toolkit provides procedures for actual business management and maintains emerging 21^st century management conventions, definitions, and standards. Management consultants who base 21^st century business management services on R-pM knowledge are licensed to help enterprises learn, organize, and manage the actual business. Business management knowledge and the Business Management Toolkit are available and supported today at result-performance-management.com.

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• How to Eliminate Problems that caused the Economic Crisis explains the major unsolvable 20^th century management problems and the solution to eliminate the problems
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This entry was posted on Tuesday, November 3rd, 2009 at 01:33 and is filed under:
Forums: Administration and Capital Management, Processes and Information Systems, Corporate Investment and Governance, Strategy and Performance Management, Top Ten 20th Century Problems
Topics: Capital Management, Conventional Management Methods, Cost Management, Enterprise Worth, Records Management, Value Management
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