Trevor Gambling

Magic, accounting and morale

Abstract This paper compares some uses made of accounting by modern societies with the use of witchcraft in less advanced ones. A common factor is a need for machinery to accommodate awkward facts in a way which does not undermine the fundamental beliefs of the culture. Western examples of this behaviour are analysed, and it is hypothesised that it occurs because low morale increases sensitivity to good and bad news. Such sensitivity affects the efficiency and existence of the organization.

ACCOUNTING FOR RITUALS.

Abstract The paper considers the proposition that accounts describe the relationships which exist between certain collaborators in the firm, rather than the activity of the firm itself. These relationships are essentially ritualistic, insofar as they are the outward forms of rather complex realities. Moreover, the ritual, and the “theology” which underlies it, are anthropocentric rationalisations, which may not completely capture the essence of the reality they are intended to portray. Such problems are especially likely at this time, in view of the discrepancy between accounting theory and the more holistic approach of the modern world-view. Conflicts tend to be circumvented rather than resolved, by devices which are strictly irrational. The function of accounting and financial professionals is both to devise new rituals to meet new circumstances and accommodate them within the orthodox canon; parallels are drawn between this activity and that of the witchdoctor in more primitive societies.

Systems dynamics and human resource accounting

Abstract Accountants all over the world are being told that their particular view of the world is too narrow. Within this context, the article reviews the potentialities and problems of Human Resource Accounting, and in passing, critically discusses some previous comments on more general behavioural research in the accounting area. Particular consideration is given to the role which dynamic systems models may serve and the paper reviews some of the authors initial observations and experiences in the area.

INTRODUCTION TO COSTING

This chapter discusses costing. A cost center is any aspect of a firms activity for which a supervisor can be made responsible, for example, boiler-room, cost office, welfare, and canteen. Where manufacture is at all highly mechanized, it is hardly reasonable to speak of production labor being applied directly to a particular piece of production; therefore, a cost center is also often a group of machines or even a single item of plant. When all direct expenditure has been allocated to the cost centers and the indirect expenditure has also been apportioned, the resulting total is the expenditure for which the supervisor of the center is responsible. Cost is also divided into variable cost that tends to vary directly with variations in the volume of output and fixed costs that tend to be unaffected by such variations, at least over a wide range of production. A major advantage of costing is that it brings to light the loss or wastage of materials or other items because every item has to be associated with some department or unit of production.

PRINCIPLES OF DOUBLE-ENTRY BOOK-KEEPING

This chapter discusses the principles of double-entry bookkeeping. Accounting consists of preparing overall final documents or accounts from underlying books of account; the latter not only provide the data for these final accounts but also provide a means of controlling and safeguarding the assets of the company. The basic first assumption is that every transaction has two equal but opposite components; conventionally, these are known as the debit and the credit. Although they both form a part of the double-entry records, it is usual for the record of cash transactions known as the cash book to be maintained in a physically separate binding from the rest of the records. Bookkeeping has been practised since the latter part of the Middle Ages; early records were invariably handwritten and used a highly stylized form of presentation. The advantage of this method is that the total of the debits and credits respectively can be easily arrived at and then deducted one from the other to give the net total or balance’. Accounting is a mathematical technique and, like most techniques, there is little point in learning about it unless one is able to practise it, at least to a limited extent.

THE INTERPRETATION OF ACCOUNTS

This chapter discusses the interpretation of accounts. A typical balance sheet will frequently contain some 40 or 50 items, some of which will increase while others decrease, so that the overall effect of the changes may still not be apparent. All techniques of interpreting accounts consist of a routine for the systematic comparison of items, and the most straightforward of these is that used for the comparison of the financial structure at the end of two accounting periods; this is known as the sources and applications of funds statement, although variations on this title are frequently used. The sources and applications statement explains the changes that have taken place in the capital structure of a company over a period of time, but in no way assists in the decision as to whether the position disclosed is good or bad. Not all trading concerns publish their accounts, and those who do may not give their results in a form adequate for a full analysis to be made; this makes it a little difficult to obtain adequate sets of ratios against which to compare the proportions of a given balance sheet.

ELEMENTS OF MECHANIZED ACCOUNTING

This chapter discusses the elements of mechanized accounting. Any operation that involves the handling of figures in accordance with an established and comprehensive set of rules is likely to prove, in bulk, a tedious and expensive chore whose result, moreover, is predetermined by the nature of the original figures, but is not usually ascertainable except by carrying out the whole operation. For these reasons, attempts have been made over the last four or five centuries to produce machines that were capable of numerical calculation. At present, accounting machines fall into two main classes: (1) the mechanical and (2) the electronic. Electronic devices are much more speedy in operation than mechanical ones and therefore, they almost always receive their information in the form of punched cards or tapes. Invoices, payrolls, and statistical information of all sorts are the type of work best suited to punch card and computer installation. The main line accounting might perhaps produce summaries of invoices relating to a particular account heading, which could then be entered in the ledger as one total.

HISTORICAL COSTING RECORDS

This chapter discusses historical costing records. Unit costing averages out the costs of production over time, and it neither takes account of the changes that may occur throughout the period nor attempts to vary the cost attributed to units passing through at those times. In those cases where the processes consist of making components that are then made up into subassemblies, which are, in turn, assembled into the finished product, no additional accounting procedures are needed; it is only necessary to point out that what has been described as raw material stores and finished goods stores may not be appropriate headings in such a situation. Where a costing system allocates and absorbs the factory costs to units of production, the prima facie result will be a complete loss of detail in the revenue account.

CAPITAL AND REVENUE

This chapter discusses capital and revenue. When other people apart from the sole proprietor are interested in the conduct of a business, it is necessary to devise some form of statement that would tell others the state of the enterprises affairs. All economic organizations are concerned with matching their income and expenditure, and a moments thought will suggest that this is by no means a simple matter or one over which there could be no argument. An economist would define income as the largest sum that could be withdrawn from a business over the period in question and still leave its value the same at the end of the period as it was at the beginning. Income and expenditure can only have meaning as a time series; one speaks of sales for the week, for the month, for the quarter, and so on. Current assets are those items that are bought by the company for the purpose of trading with them, such as inventories of raw materials, engineers stores, or finished goods for resale.

COSTING TECHNIQUES ( continued )

Some ingenuity can be exercised in finding bases for allocating the indirect expenses and calculating the absorption rates. The calculations are made in advance on the basis of estimate or budgets, and the total expenditure is compared with the total amount absorbed by applying the predetermined rate to the actual production to show an overall variance. The labour and material content of an order can readily be estimated from drawings and specifications, but the overheads applicable to a job can only be arrived at indirectly by the use of an absorption rate. It is generally thought best to relate overhead absorption to time in this way, and a fair measure of the time spent in the factory is the number of labour or machine hours that have been charged up to the unit as a direct cost. It is only production departments that will have absorption rates to apply to their output. The estimated expenditure of the service departments is apportioned among the production departments in much the same ways as are used to allocate the indirect expenses.