The story of the Bean Counters     

 Book Keeping is the Art and/or Science of keeping track of all forms of money (including Barter) coming into or going out of a Business or Entity. Used anywhere else when and why an account of money is required to be kept. 

    Consider:

    If you go down to an ATM and transfer $100 from your own Bank Account to another linked Bank Account (say your older son's Account) you move "electronic" money about. You could ask for a balance of each of the accounts before and after to keep track of your electronic money. 

     But in a few weeks time you will receive two Bank Statements. One for you and one for the son. You know when you did this deed and where it all happened.

    The question now is "Why". Why did your Bank Account  Statement show a debit of $100? What is your story? At the same time, can you see that your son is puzzled? There is a credit of $100 into his Bank Account Statement. Why was it put there? What happened?

     Can you also see that for the one ATM program electronic transfer you made, you have managed to create the need for two stories - two accounts? What about the two $100s that have left electronic footprints on two Verifiable Bank Account Statements.  What will the ATO or *IRO say? 

(*IRO Inland Revenue Office, New Zealand)

(VAMPIRE: Verified Accounts Management Program for the Inland Revenue Environment - see the Link?)

    There is nothing the ATO likes to see better than Bank Statements unless it is your story of what did really happen. The Books of Account!

    If a policeman asked you to make an "account" of your actions on such and such a date could you give it? Same thing here. Except that you would use a journal or ledger and insert into columns the passage of that money. Both $100 debit and the other $100 credit. Footprints in Bank Statements of $200 in total.

       If you have a visitation from the ATO it will be to audit your books of account. Or, if you are just starting up in business, at least to see if you are actually using the books of account that they can understand.

      This is an Account (No 1)

       Most accountants know that Double Entry Bookkeeping was invented by an Italian Monk way back in 1493. But they don't know why the Monk invented it.

       Notice the date? A year after Christopher Columbus discovered the Americas or (West) Indies as he called it.

      Chris was Symbiotically Sponsored by the King and Queen of  Spain to sail west over the horizon. 

       He had gotten a knock back from the Pope who believed the earth was flat.  Chris would fall off the edge if he sailed west said they. The Spanish Inquisition was on at the time so Chris took a terrible risk going against the Pope's belief.

       Well, we all know that sailing west took Columbus to the Indies and the Incas and all that gold and booty to knock off.

       So when he sailed back, he dropped off half of his booty for Queen Isabella and King Phillip as the Symbiotic Sponsorship contract demanded.

   (Symbiotic: you scratch my back I'll scratch your's)       

    Then he sailed back to Naples to see Mom and Dad and tell them of his good fortune. 

    "What ho"? Says the Pope. "Where's my half of the Christian booty?"

      Well! Chris had a devil of a job explaining the Spanish Symbiotic Sponsorship of his adventure. That indeed the Spanish Reality had gotten their half for putting up their money.

   (Real (Estate) does not mean like "True". It means Royal in Spanish. Every piece of land in Australia belongs to the Crown (Queen) as Real Estate (Real - Royal) Try not paying your rent (rates) and find out who really owns your block of real estate the hard way) Thought you'd like to know that 'er for real)

     "In that case you will have to go again. Next time I want my share. I know you owe it to those Spaniards so I'll get one of our mafia - sorry - Monks to fix up the booty journal (accountant's book) We can all have a share of the Incas gold without the Spaniards really knowing any better"

     So Chris was forced to carry a Monk as the Accountant and two sets of books of account with him on his next trip. One book for the Spaniards with a third of the real inventory (not the real half as was expected) The other two thirds of the gold for the Pope, Chris and crew. 

     Two books of Account for the same venture. With a Monk with his "Double Entry" So now, modern naughty boys keep two sets of books. One for the ATO (false) and one real one. But in this case the "real" means "true"

    OK? That was one account.

      On the next trip Chris robbed (sorry - relieved or was it charged - perhaps "taxed") the "Indians" and Incas et al of 1000 Kilograms of Gold.

The Monk Accountant's Journal of the journey to the West Indies was written thus:-

No 2 Account        Date 1st April 1495

Debit: Indians:                   1000 Kg Gold 

Credit: Pope:                        300 Kg Gold 

Credit: Spaniards:                300 Kg Gold   

Credit: Columbus:            300 Kg Gold

Credit: Accountant          100 Kg Gold 

Was it ever any different?                              But can you see the difference in the two Accounts, No1 and No2?

Gross Income

= Total Income of sales of Goods and Services plus their GST.   (GST goes to your GST Bank Account)

Net Income   

= Value of total sales less refunds to customers less cost of goods sold less their GST

Cost of Goods sold

= Opening Inventory plus Inventory purchased less Inventory on hand end of year

Gross Profit

= Net Income less cost of goods sold  less cost of Refunds

Net Profit

= Gross profit less all allowable business deductions including depreciation

Net Profit

= Taxable Profit = Taxable Income

Banking Money

= Taxable Profit less Income Tax at the Marginal Rate (see also Company Standard Tax Rate)

Dividends

= What the Board of Directors sees fit as a share for Shareholders

Franked Dividends

= Dividends which has Income Tax removed

Imputation Credits

= The receiver of Franked Dividends has an Income Tax Credit of so many $ Dollars

Net Tax Payable

= Gross Tax Payable less Rebates less Imputation Credits (too much)

Refund

= Tax Paid less Net Tax Payable

Otherwise

= Net Tax Payable less Tax Paid  (there could be an extra tax involved for late payment of tax)

Yield

= Dividend multiplied by original price divided by latest stock price.

Wealth

= Assets less liabilities

Wealthy

= Time one can live in the same fashion if an accident etc. happens and employment ceases.

Rich

= A psychological attribute indicating a winner and grinner

Poor

= A psychological attribute indicating a looser