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Some basic concepts of accountancy used in MDIA
Some basic concepts of accountancy used in MDIA
Some basic concepts of accountancy used in MDIA
Some basic concepts of accountancy used in MDIA
Some basic concepts of accountancy used in MDIA
Some basic concepts of accountancy used in MDIA
Some basic concepts of accountancy used in MDIA
Some basic concepts of accountancy used in MDIA
Some basic concepts of accountancy used in MDIA
Some basic concepts of accountancy used in MDIA
Some basic concepts of accountancy used in MDIA
Some basic concepts of accountancy used in MDIA
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Some basic concepts of accountancy used in MDIA

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MDIA brief-pres-002-131013-base-accounting-concepts ... This slide deck describeds some or the basic concepts of accountancy used in MDIA. This is important because the key accounting constructs have …

MDIA brief-pres-002-131013-base-accounting-concepts ... This slide deck describeds some or the basic concepts of accountancy used in MDIA. This is important because the key accounting constructs have a long history and have proved to be immensely powerful for the management of for-profit business operations. We are taking some of these key concepts and applying them in the broader context of accounting for all three components of the triple bottom line ... people, planet and profit.

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    • 1. MDIA – Multi Dimension Impact Accounting MDIA – Multi Dimension Impact Accounting Some Basic Concepts from Accountancy Some Basic Concepts from Accountancy An initiative for radical reform of the prevailing metrics Peter Burgess peterbnyc@gmail.com Copyright (c) 2013 Peter Burgess
    • 2. Some Basic Concepts from Accountancy Some Basic Concepts from Accountancy Accounting is Basically Simple ● Every money transaction in the organization is recorded ● The transactions are organized into accounts and added up ● The totals are organized into periodic reports ● From time to time an auditor checks the process ● There are very many transactions, but the process is simple Copyright (c) 2013 Peter Burgess
    • 3. Some Basic Concepts from Accountancy Some Basic Concepts from Accountancy Balance Sheet and P&L Accounts ● There are two sorts of accounts • • ● Balance sheet accounts • • • ● Balance sheet accounts Profit and loss accounts Assets Liabilities Owner's equity Profit and Loss accounts • • • Revenues Costs Profit Copyright (c) 2013 Peter Burgess
    • 4. Some Basic Concepts from Accountancy Some Basic Concepts from Accountancy Accounting is Immensely Powerful I ● Financial reports are short • ● There is a Balance Sheet … a summary of: • • • ● This summarizes the revenues and costs There is a Cash Flow statement • ● Assets Liabilities Owner's equity There is a Profit and Loss statement • ● for a huge organization like GE, summary is three pages This summarized the flows of money There is selective detail and explanations • • Some is required by law and regulation Some is used to explain items in the summary information Copyright (c) 2013 Peter Burgess
    • 5. Some Basic Concepts from Accountancy Some Basic Concepts from Accountancy Accounting is Immensely Powerful II ● Same process to report every time ● This makes comparison easy and meaningful ● With comparison it is easy to ask questions ● Good questions results in good answers Copyright (c) 2013 Peter Burgess
    • 6. Some Basic Concepts from Accountancy Some Basic Concepts from Accountancy Two Ways to Calculate Profit ● From the Profit and Loss Account • • • ● Add up all the revenues for the period Add up all the costs for the period The difference is the profit or loss for the period From the Balance Sheet • • • Get the owner's equity from the beginning of the period Get the owner's equity from the end of the period The difference is the profit or loss for the period ● In MDIA progress is similar to profit ● In MDIA state is similar to the balance sheet • • State has both money and value combined In MDIA change in state is progress Copyright (c) 2013 Peter Burgess
    • 7. Some Basic Concepts from Accountancy Some Basic Concepts from Accountancy Example: Metrics for the Place ● State of the place • • • • • ● Progress … change in state over time • • • • ● Its natural resources Its human resources Its economic activities Its public infrastructure Its organizational infrastructure Quality of life for people Impact on planet Impact on place Profit for business Performance • ● How big the progress How much net consumption of non-renewable resources Copyright (c) 2013 Peter Burgess
    • 8. Some Basic Concepts from Accountancy Some Basic Concepts from Accountancy Example: Metrics for the Organization ● State of the organization • • • • • ● The money based balance sheet The human capital The value of net social valuadd Provision for net resource depletion Provision for environmental degradation Profit and impact • • • • • • The money profit Direct valuadd for people Indirect valuadd for family Indirect valuadd for community Resource depletion Environmental degradation Copyright (c) 2013 Peter Burgess
    • 9. Some Basic Concepts from Accountancy Some Basic Concepts from Accountancy State, Progress and Performance ● ● ● State • Is like a balance sheet Progress • Change in balance sheet over time Performance I • • • ● Amount of progress in relation to net change in resources How much quality of life improved How much stress on planet reduced Performance II • How much progress versus how much progress possible Copyright (c) 2013 Peter Burgess
    • 10. Some Basic Concepts from Accountancy Some Basic Concepts from Accountancy Mark to Market ● This allows a balance sheet value change to determine profit • • ● Mark to market conflicts with other accountancy rules • ● Has been used aggressively in the financial sector It has been allowed by rule makers in accountancy Balance sheet value is 'lower of cost or market value' In MDIA the mark to market idea is used as follows: • • • • An economic activity like education improves a person's skills Improved skills increase a person's opportunities This will translate into a better job and more income The present value of more income is an increase State value Copyright (c) 2013 Peter Burgess
    • 11. Some Basic Concepts from Accountancy Some Basic Concepts from Accountancy Standard costs ● A standard cost is the expected cost of an item • • ● Standard cost accounting simplifies analysis • ● But does not detract from the utility of analysis Variance analysis • • • • ● It is the theoretical engineering cost; and A provision for operating inefficiencies Actual costs versus standard costs produces a variance This can be done at a higher level than the individual item When there is a material difference it is time for inquiry Otherwise no need for inquiry In MDIA a similar approach is used for standard values Copyright (c) 2013 Peter Burgess
    • 12. Some Basic Concepts from Accountancy Some Basic Concepts from Accountancy Invitation ● MDIA is a big idea ● It facilitates radical reform of the prevailing metrics ● The next steps are mainly associated with technology • • • ● Old fashioned easy information also has value • ● How to build the standard value database How to build a database of 'state of place' How to build a database of 'impact of product' Getting this organized and into a database Please get in touch. Please help Peter Burgess – TrueValueMetrics peterbnyc@gmail.com http://www.truevaluemetrics.org Copyright (c) 2013 Peter Burgess

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