4 ms·

As a former bookkeeper, I should mention that this is technically bookkeeping, not accounting, which vaguely corresponds to the difference between computation a

by bcoates 11y ago

As a former bookkeeper, I should mention that this is technically bookkeeping, not accounting, which vaguely corresponds to the difference between computation and programming. That said, this is very dangerous knowledge; once bookkeeping makes sense like this you will constantly have to resist the urge to yell at people who claim "expenditure X really shouldn't count because it has benefit Y", which is a disturbingly common belief among otherwise smart people.

scrapcode 11y ago
I had an opportunity to be the manager of a multi-million dollar contractor's office. It included bookkeeping among many other things. Never before had I realized the power of cash-flow, but also the destruction. On paper there were many employees that made more annually than the CEO.
- dmak 11y ago
  Could you elaborate? I would be interested in hearing more
  - hluska 11y ago
    This may not be what the op had in mind, but I remember my first bookkeeping (mostly AR/AP/payroll) gig. Watching the books was like watching the tide. Cheques from customers seemed to come in waves, and you'd watch the bank account swell. But then, you'd do a monthly payable run and a few days later you'd enter a big payroll with the monthly expense reimbursements. All of a sudden, the funds in the bank account started to dwindle...until the next wave of cheques...
    - tmornini_ey 11y ago
      Nice analogy, love it!
    - scrapcode 11y ago
      Just got back to this. But almost exactly. I'd deposit the biggest checks I've ever seen. But they'd be gone almost immediately if we zeroed the AP. It completely changed the phrase of "letting the bills pile up" for me. For what it's worth, I never once payed a late fee. I'd pay the original amount no matter how late and never heard a word from the receiving end's AR department.
camz 11y ago
I wouldn't try to separate bookkeeping from accounting too much. As a cpa, the lines are blurred too often because we're usually making decisions and adjustments along the way. But, a little information can definitely be dangerous. It can be a huge time sink to "restate" the books to suit someone's vision and at worst it allows people to misrepresent the information.
- jasode 11y ago
  >I wouldn't try to separate bookkeeping from accounting too much. I think of them as distinct and separate concepts: bookkeeping: the recordkeeping of transactions. The "data entry". You can have lower wage data entry clerks tearing open envelopes to type in data from vendors' invoices and recording deposits of checks from customers. At this layer, the data needs to be recorded correctly. accounting: literally the management of "accounts". This is a position of education (CPAs). Their value-added thinking happens above the layer of bookkeeping. They use professional judgement to set up a "chart of accounts" ... what kind of buckets to keep track of various money, how many buckets, etc. They are in charge of "closing the books" each month and preparing financial reports. Yes, sometimes the activities blend into each other. Some bookkeepers do higher level "accounting" activities and some Certified Public Accountants also do grunt work of "bookkeeping" but they're still separate cognitive activities. Lastly, there's finance. The finance layer sits above accounting and bookkeeping. Finance management (CFO, treasurer, etc) focuses on strategy of money. Should the company lease or buy the building, the tax implications of foreign earnings, stock buybacks, etc. The accountants & bookkeepers can report exactly how much money is sitting in the bank but they are not the ones who decide what the best strategy is for it. It's the small businesses where "bookkeeping" and "accounting" are synonymous (e.g. using Intuit QuickBooks). In those mom & pop shops, the "finance" strategy is handled by the owner(s) of the company.
  - sundarurfriend 11y ago
    From your description, it sounds like bookkeeper:accountant as DB-user:DB-admin - the accountant/admin defines the schema, and the bookkeeper/user only gets to work at the data level, with no metadata level decisions. Is this analogy sound?
rahimnathwani 11y ago
This doc is part of a series. I just skimmed the first two docs (this '101' and tthe next '102'). They do a reasonable job of introducing accounting. I've conducted training sessions in accounting (for people whose day job is something else) at several tech firms. Two things I've found drive the points home are: - having to make a series of debit/credit transactions (from a supplied description of stuff that has happened) - having to work out what certain items on a balance sheet or income statement mean It's hard to appreciate the beauty of the accounting equation until you see how the balance sheet, income statement, and cash flow statement are related.
- tmornini_ey 11y ago
  Thanks for the positive feedback. We worked very hard to explain it in a way developers would appreciate.
john2x 11y ago
Heh, once I started using ledger[1] to track my personal expenses, I get super annoying (and cranky) when someone borrows money from me. [1]: http://ledger-cli.org http://ledger-cli.org
- tmornini_ey 11y ago
  Financial awarenesses sometimes hits you like a freight train!
filearts 11y ago
As a Canadian CPA, CA (and also programmer), I think the difference between bookkeeping and accountancy is the need for judgement. A bookkeeper will record transactions in designated accounts using the process that has been indicated for that type of transaction. However, the bookkeeper will not be evaluating the revenue recognition process to establish when it is reasonable to record revenue (versus deferred revenue, a liability) as a transaction relates to the standards in effect. It is also likely that the bookkeeper will not be responsible for making calls as to whether certain situations should be recorded as contingent liabilities or simple F/S note disclosures or for things like testing intangible assets for impairment. For a typical tech startup, there are probably fewer situations that give rise to the need for an accountant than bigger, more complex entities. That being said, I suspect that many start-ups with complex cap tables are not reporting in full GAAP / IFRS conformity simply because this is likely not something required by the users of their F/S.
- tmornini_ey 11y ago
  Well said. Many people ask us if we're GAAP compliant, and all the rest. We just say "we are if you make the right entries!" :-)
tmornini_ey 11y ago
Since our product bridges the gap between bookkeeping, accounting, finance and engineering, and because this is aimed at developers, we're building the knowledge up from bookkeeping in part 1, to accounting basics in part two.

by bcoates 11y ago

scrapcode 11y ago

I had an opportunity to be the manager of a multi-million dollar contractor's office. It included bookkeeping among many other things. Never before had I realized the power of cash-flow, but also the destruction. On paper there were many employees that made more annually than the CEO.

dmak 11y ago
Could you elaborate? I would be interested in hearing more
- hluska 11y ago
  This may not be what the op had in mind, but I remember my first bookkeeping (mostly AR/AP/payroll) gig. Watching the books was like watching the tide. Cheques from customers seemed to come in waves, and you'd watch the bank account swell. But then, you'd do a monthly payable run and a few days later you'd enter a big payroll with the monthly expense reimbursements. All of a sudden, the funds in the bank account started to dwindle...until the next wave of cheques...
  - tmornini_ey 11y ago
    Nice analogy, love it!
  - scrapcode 11y ago
    Just got back to this. But almost exactly. I'd deposit the biggest checks I've ever seen. But they'd be gone almost immediately if we zeroed the AP. It completely changed the phrase of "letting the bills pile up" for me. For what it's worth, I never once payed a late fee. I'd pay the original amount no matter how late and never heard a word from the receiving end's AR department.

camz 11y ago

I wouldn't try to separate bookkeeping from accounting too much. As a cpa, the lines are blurred too often because we're usually making decisions and adjustments along the way. But, a little information can definitely be dangerous. It can be a huge time sink to "restate" the books to suit someone's vision and at worst it allows people to misrepresent the information.

jasode 11y ago
>I wouldn't try to separate bookkeeping from accounting too much. I think of them as distinct and separate concepts: bookkeeping: the recordkeeping of transactions. The "data entry". You can have lower wage data entry clerks tearing open envelopes to type in data from vendors' invoices and recording deposits of checks from customers. At this layer, the data needs to be recorded correctly. accounting: literally the management of "accounts". This is a position of education (CPAs). Their value-added thinking happens above the layer of bookkeeping. They use professional judgement to set up a "chart of accounts" ... what kind of buckets to keep track of various money, how many buckets, etc. They are in charge of "closing the books" each month and preparing financial reports. Yes, sometimes the activities blend into each other. Some bookkeepers do higher level "accounting" activities and some Certified Public Accountants also do grunt work of "bookkeeping" but they're still separate cognitive activities. Lastly, there's finance. The finance layer sits above accounting and bookkeeping. Finance management (CFO, treasurer, etc) focuses on strategy of money. Should the company lease or buy the building, the tax implications of foreign earnings, stock buybacks, etc. The accountants & bookkeepers can report exactly how much money is sitting in the bank but they are not the ones who decide what the best strategy is for it. It's the small businesses where "bookkeeping" and "accounting" are synonymous (e.g. using Intuit QuickBooks). In those mom & pop shops, the "finance" strategy is handled by the owner(s) of the company.
- sundarurfriend 11y ago
  From your description, it sounds like bookkeeper:accountant as DB-user:DB-admin - the accountant/admin defines the schema, and the bookkeeper/user only gets to work at the data level, with no metadata level decisions. Is this analogy sound?

rahimnathwani 11y ago

This doc is part of a series. I just skimmed the first two docs (this '101' and tthe next '102'). They do a reasonable job of introducing accounting. I've conducted training sessions in accounting (for people whose day job is something else) at several tech firms. Two things I've found drive the points home are: - having to make a series of debit/credit transactions (from a supplied description of stuff that has happened) - having to work out what certain items on a balance sheet or income statement mean It's hard to appreciate the beauty of the accounting equation until you see how the balance sheet, income statement, and cash flow statement are related.

tmornini_ey 11y ago
Thanks for the positive feedback. We worked very hard to explain it in a way developers would appreciate.

john2x 11y ago

Heh, once I started using ledger[1] to track my personal expenses, I get super annoying (and cranky) when someone borrows money from me. [1]: http://ledger-cli.org http://ledger-cli.org

tmornini_ey 11y ago
Financial awarenesses sometimes hits you like a freight train!

filearts 11y ago

As a Canadian CPA, CA (and also programmer), I think the difference between bookkeeping and accountancy is the need for judgement. A bookkeeper will record transactions in designated accounts using the process that has been indicated for that type of transaction. However, the bookkeeper will not be evaluating the revenue recognition process to establish when it is reasonable to record revenue (versus deferred revenue, a liability) as a transaction relates to the standards in effect. It is also likely that the bookkeeper will not be responsible for making calls as to whether certain situations should be recorded as contingent liabilities or simple F/S note disclosures or for things like testing intangible assets for impairment. For a typical tech startup, there are probably fewer situations that give rise to the need for an accountant than bigger, more complex entities. That being said, I suspect that many start-ups with complex cap tables are not reporting in full GAAP / IFRS conformity simply because this is likely not something required by the users of their F/S.

tmornini_ey 11y ago
Well said. Many people ask us if we're GAAP compliant, and all the rest. We just say "we are if you make the right entries!" :-)

tmornini_ey 11y ago

Since our product bridges the gap between bookkeeping, accounting, finance and engineering, and because this is aimed at developers, we're building the knowledge up from bookkeeping in part 1, to accounting basics in part two.