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Double-entry book-keeping

11th Feb 2013
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It is no secret that I believe we now need to move on from a concept invented when we believed the world was flat:

This is a response from a Chartered Accountant:

Jeff
I could not work out how to reply to your blog but would have said something on these lines:
"Double entry bookkeeping is, like Einstein's general Theory of Relativity, a simple and elegant solution. Just like that theory needs a bridge to the detailed world of Quantum Mechanics, so does Double entry bookkeeping to financial reporting. When I was training to be a Chartered Accountant we had four fundamental accounting concepts to apply, the most important of which was Prudence. In recent years this concept has been relegated and Accounting Standards have required companies to ignore this concept with such devastating consequences as was exhibited by the requirement for banks to provide for debts on an incurred loss rather than expected loss basis.
Good accountants learn from the discipline of Double entry bookkeeping to reconcile information and to bring it to the attention of those who operate in a Single entry world, even when the accountant has to be a bearer of difficult or uncomfortable reality. I hope the Standard setters will bear this in mind when considering the changes needed to implement an accounting system that will more rigorously identify the risk profile of a business at any particular time."
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By User deleted
11th Feb 2013 22:49

Personally ...

... I think denying double entry book-keeping is a flat earth mentality.

It is like Newton's 3rd law seeing as we are using physics metaphors - to every action there is an equal and opposite reaction. It is fact, and any accounts not reconciled on that principal are fictitious bunkum.

I do agree that is just a small step in reporting, what matters more is the substance behind them, but no point putting the walls up until you have lain the foundations!

Getting all biblical in honour of today's papal announcement, I will quote Matthew, Ch7:24-27

The Wise and Foolish Builders

24 “Therefore everyone who hears these words of mine and puts them into practice is like a wise man who built his house on the rock. 25 The rain came down, the streams rose, and the winds blew and beat against that house; yet it did not fall, because it had its foundation on the rock. 26 But everyone who hears these words of mine and does not put them into practice is like a foolish man who built his house on sand. 27 The rain came down, the streams rose, and the winds blew and beat against that house, and it fell with a great crash.”

 

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