Morri Young: "Cash or accrual? Setting up an accounting system that works for you".
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Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012 Cash and Accrual Accounting Webinar Adult Learning Australia May 25, 2012
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ALA presentation 25 May 2012: There are so many decisions that need to be made when setting up an accounting system for your organisation.In this session, presenter Morri Young from Matrix On Board will provide an overview of financial reporting; in particular the advantages and disadvantages of cash and accrual accounting systems.Cash and accrual are the two methods of accounting for income and expenses. Behind these methods are the essential concepts of financial reporting. With the use of interactive exercises and easy to understand language, participants will learn the differences and benefits of each accounting method.Morri Young is the Managing Director, Strategy and Market, for Matrix on Board. Morri has been working with government and community non-profits for 25 years. His strengths are project management, strategic planning and innovative solutions to organisational issues.Matrix on Board has supported non-profit organisations across Australia since 1997 to create tailored training and development solutions.
Transcript of Morri Young: "Cash or accrual? Setting up an accounting system that works for you".
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Cash and Accrual Accounting
Webinar
Adult Learning Australia
May 25, 2012
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Housekeeping
• Introductions• Room etiquette• Scope of the session
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Matrix on Board
o Three MDs from the NFP sector
o Established in 1997
o Building capacity in NFPs and Social Enterprises
o Our services
• Management support• Financial management• Education and training
www.mob.com.au
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Matrix on Board
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Matrix on Board
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Matrix on Board
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Accounting
The Science and the Art of Accounting
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Accounting
The Science is recording what we earn, and spend, and own and owe.
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Accounting
The Art is putting a value on what we earn, and spend, and own and owe.
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Accountants are not Gods
These “rules” are individual and unique.
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Accountants are not Gods
These “rules” are arbitrary and agreed.These “rules” are individual and unique.
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
The father of Accounting
Fra Luca de Pacioli
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Double Entry BookkeepingDonation
DonationsReceived
Cash at Bank
Income Account
Asset Account
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Accounting Methods
CASH ACCRUAL
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Accounting MethodsCASH
Accounting for what we earn and spend when we earn and spend it.
Simple to process. [“Spend money” “Receive Money” buttons on MYOB]
Enters transactions at the date payment is made or received.
Reflects cashflow.
But not a ‘real’ financial picture.
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Accounting MethodsACCRUAL
Accounting for the value of ‘obligations and commitments’ we make to others and they make to us
More complicated to process. [“Purchases” “Sales” buttons]
Enters transactions at the date commitment is made or received.
Reflects a combination of owing and owning, earning and spending.
A more ‘real’ financial picture.
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Accounting MethodsACCRUAL MANTRA
“Allocate the Right Amount in the Right Account for the Right Period”
$500RENTJUNE
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
ExampleThe Coveted Bookshelf
Its March 21 and its your birthday! Fortunately you were paid today in cash, and you have a fortnight’s pay of $1000 in your purse. On the way home, you see that nice little bookshelf, the one you have admired for months. You know that the monthly household rent of $1000 is due in two weeks (April 1), there is food in the fridge, and there are no bills on the kitchen bench. Your regular birthday money from Grandma hasn’t arrived, but it is due any day and she has sent you $250 each year for the past 10 years! You see that the bookshelf has been reduced to $400…. You are very tempted, (little knowing that there is a $300 telephone bill for the month in the mail heading towards you!) The bookshelf is a bargain! Should you buy it?
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
The Coveted BookshelfMy Income Statementfor the Fortnight ended 31 March 20XX
IncomeWagesBirthday MoneyTotal Income
Expenditure BookshelfDeliveryRentFoodPhone BillTotal Expenditure
Surplus/Deficit
CA
SH
AC
CO
UN
TIN
G
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
The Coveted BookshelfMy Income Statementfor the Fortnight ended 31 March 20XX
IncomeWagesBirthday MoneyTotal Income
Expenditure BookshelfDeliveryRentFoodPhone BillTotal Expenditure
Surplus/Deficit
AC
CR
UA
L A
CC
OU
NT
ING
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
ExampleThe month of October
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Income Statementfor the Month ended 31 October 20XX
IncomeGrant Received
Total Income
Expenditure ElectricityPhonePhotocopy Lease
Total Expenditure
Surplus/Deficit
CA
SH
AC
CO
UN
TIN
GWay Forward Inc
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Income Statementfor the Month ended 31 October 20XX
IncomeGrant Received
Total Income
Expenditure ElectricityPhonePhotocopy Lease
Total Expenditure
Surplus/Deficit
AC
CR
UA
L A
CC
OU
NT
ING
Way Forward Inc
Adult Learning Australia Webinar: Cash and Accrual Accounting 25 June 2012
Thank you…
From Adult Learning AustraliaAnd Morri Young from Matrix on Board
