BY H. ASHLIN DYKES Partner, Atlanta Office
Presented before the Alpha Beta Chapter of Beta Alpha Psi at the University of Alabama, Tulscaloosa — November 1959
How many of you believe that accounting is the end result—that in recording transactions accurately and in a logical and orderly manner
the full purpose of accounting has been served?
For many years accounting—the language of business—served basically as a historical record. Its primary purpose, other than perhaps
to keep a record of the cash balance and receivables, was to permit
preparation of rather crude annual or more frequent statements showing the approximate financial position of the enterprise and the results of its operation for a period of time. With the advent of income
taxation, accounting came to serve also as a means of accumulating
data required in preparing tax returns. These limiting concepts still persist in great numbers of smaller enterprises and also in some larger ones.
Today, faced with the complexity of business, with the diversification
of operations, with high costs, and with exorbitant taxes and fierce competition, the original concepts of the use and value of accounting
are completely inadequate except possibly in the case of small simple operations. Accounting is not the end but the means to an end—the means of furnishing management with current information
vital to proper planning and control of operations.
Accurate monthly statements are necessary, showing the financial position of the enterprise and the results of operations classified according
to products, plant locations, and other appropriate divisions, but more is needed. Control of costs is essential—production costs, selling and distribution costs, and costs relating to other divisions of the operation. Frequently it is desirable to make weekly compari-son of actual and standard departmental labor or other costs so that prompt corrective action may be taken where the need is indicated. Budgeting for a year or longer periods of time is employed in planning
and directing business and in other activities. Accurate estimates
as to the flow of cash, inventory requirements, probable results
of operations, and the resulting financial position are only some of the information required. In serving in these and related matters