The financial history of a company is potentially its primary source of business information. It can easily be expanded to provide more information on a much timelier basis. It even can be used to formally measure the rates of change that are occurring in the company (true “financial calculus”).
However, before the financial history of the company can be a truly useful tool for investors and managers, it needs to be unfettered from the constraints of the traditional accounting model. Today’s accounting is limited by its attachment to the fiscal period and its inability to adapt itself to the specific informational needs of the company. Neither of these limitations is necessary in the age of the ubiquitous computer.
We need to rediscover the fundamental information of a company’s financial history – the record of simple transactions in the bookkeeper’s journal. By exploiting this information in its fundamental form, a company can use its experience of the past as a powerful analytical tool that will guide it and its investors into the future. See Banking the Past, page 218.
Showing posts with label journal. Show all posts
Showing posts with label journal. Show all posts
Wednesday, July 23, 2008
Thursday, July 17, 2008
9. The Journal
The journal, the accountant’s “book of original entry,” is the chronological record of the financial events of the business. The events, referred to as transactions, are recorded in the journal as a financial quantity and the relationships that this quantity has components of the company. Within the journal, all of the data that is every used by accountants is recorded in one place. Everything other piece of data in the financial world is simply a copy or a summation of the data found in the journal.
From the primitive information found in the journal, accounting is able to generate new information that tells managers and investors:
1. The total income that was made by the business in a new given time period;
2. The total assets and liabilities of the business at a given point in time;
3. The flow of the company’s cash assets during a given time period;
4. The relative growth of the business during a given time period.
Given a journal, and no general ledger, an automated program is able to produce all of the data used in financial analysis. And, without the burden of a general ledger, the journal can produce this information for any arbitrary period of time.
See Banking the Past, page 43.
From the primitive information found in the journal, accounting is able to generate new information that tells managers and investors:
1. The total income that was made by the business in a new given time period;
2. The total assets and liabilities of the business at a given point in time;
3. The flow of the company’s cash assets during a given time period;
4. The relative growth of the business during a given time period.
Given a journal, and no general ledger, an automated program is able to produce all of the data used in financial analysis. And, without the burden of a general ledger, the journal can produce this information for any arbitrary period of time.
See Banking the Past, page 43.
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