Accounting 101: For Non-Accountants

We, creative individuals didn’t get much of number subjects specifically Architecture. The basic math subjects we had was Calculus, Strength of Materials, Algebra and the like. Actually, I think all curriculum in school in that manner should have a subject on basic Accounting. What if some point in their life, they have decided to build a business that will help the world to solve some kind of problem that will help many.

What if for example a nurse wanted to build her own business for elderly, or what if a teacher wanted to build a school of her own. And for us, now, as professional Architects, we wanted to build our own business. How could we grasp the basic Accounting if we didn’t have the basic knowledge in this?

So, I have here a book on Financial Basics by Schmidgall, Hanes and Ninemeier. Whenever I’m talking about Accounting 101, my main reference is this book. Let’s see how we can we make the most of this book cover to cover. Since we are in the verge to study everything from scratch, it will be most EGG-citing if we will study this together.

Please bear with me, as I’m studying every little topics I might think of that will help in the success of EggInc.

Now let’s put it in real world scenario since, we, Anthony and Tika are the Owners of EggInc, needs to know much more than just how to serve good food and drinks at reasonable prices. We must also know how to “report” or “account” for the activities and costs related to managing EggInc.

Systems used to report Revenue, Expenses, “Bottom-Line Profits” and overall financial health of EggInc involves correct Accounting processes and procedures.

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What is Accounting?

Accounting is a variation of the word “account” which is defined as to report, to record, to describe or to explain related to the finances of Anthony or Tika or EggInc.

We must know the basics of EggInc accounting for the sake of EggInc’s:

1. CUSTOMERS/ GUESTS:

• In providing outstanding customer service at a price that ensures EggInc is PROFITABLE.

2. EMPLOYEES

• It is for employee’s payroll and taxes, salaries and benefits. EggInc is to provide employees with “steady” jobs and competitive wages.

3. VENDORS and SUPPLIERS

• Individuals that sells the product and services to supply to EggInc, need to run their businesses also. They need to know about the creditworthiness of EggInc which they do business to.
• Questions regarding Operations Financial Health must be answered using standard financial reports.

4. OWNERS and possible EggInc’s INVESTORS:

• EggInc’s Investors will require that the financial information that they receive should be timely and accurate.
• Data must conform to commonly accepted financial reporting, standards to clearly and fairly present the financial condition of EggInc as a business.

5. GOVERNMENTAL AGENCIES

• Requires reporting of financial information.
• Employees of EggInc shall have wage reports-payroll and taxes.
• Reporting of Food and Beverage revenues used to determine sales/tax.
• EggInc’s profits are determined in large measure by financial operating results which are presented annually in manner accepted by IRS (Internal Revenue).

6. HOSPITALITY INDUSTRY:

• Food, labor, rent and utility costs can be compared when operating two or more units. The use of possible same accounting report results can be compared together.

7. MANAGERS & THEIR CAREER:

• Anthony and Tika will evaluate a prospective manager’s past success. We need to ask about their previous impact on the revenue costs and profits in the operations they have managed or helped to manage.
• Managers must be able to speak knowledgeably about accounting related aspects of their performance.
• Manager’s compensation and bonuses are usually tied to EggInc’s financial performance.

NOTE:

The Manager of EggInc must interact with others as Accounting Systems are designed and as systems/procedures to collect financial data are developed.

Effective EggInc Managers must be able to discuss their needs with company’s Accountant and understand the Accounting information that is provided:

• To know what information is needed for short and Long-term control of EggInc
• To understand information reported in Financial Statement
• For corrective actions to improve EggInc’s profitability
• To make operating decisions with full knowledge and their potential impact on EggInc’s financial status.

Accounting involves two (2) basics principles which is shown in the illustration below:

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EggInc’s Quote of the day:

“... If now is not the time to act, when will it be?”

- Hillel, C.50 A.D.