#99- Inventory System - Perpetual vs Periodic

Entity can account for its inventory by using either perpetual method or periodic method.

Under perpetual method:
- the entity record for every single movement of the inventory (i.e. in and out of the inventory)
- at any single point of time, the entity is able to recall the inventory on hand
- frequency of stock-take required is lesser than those accounted using periodic method

Under periodic method,
- every single movement for the inventory (i.e. in and out) is not required to be tracked
- the entity perform a periodic stock-take to ascertain the inventory balance
- inventory on hand can only be recalled after the stock-take is performed
- frequency of stock-take required is higher than those accounted using perpetual method
- cost of sales is computed by using the following formula: Opening Stock+ Cost of Goods Manufactured / Purchase - Closing stock

The above summarize the difference between perpetual inventory method and periodic inventory method.

Bleeding Edge Marketing

 The case you are about to read is true.  The names have been changed to protect the not-so-innocent.

Dear Bill,

XXX Insurance Company is pleased to provide you with this desk calendar for your home or office.  You'll notice it resembles three people linked together, like our logo.

[skip the paragraph that explains what the three people in the logo represent and the one telling me how wonderful their insurance is, ending with this sentence:]

And should the unexpected happen, rest assured that XXX will handle your claim quickly and efficiently.

To our valued customers, we hope you enjoy this small token of our appreciation . . .

I'm sorry, I just can't go on.  I got this dizzy, disoriented feeling like I had been whizzed back to the 1950's, before the days when absolutely every machine that has a computer chip in it boasts a calendar, back when a desk calendar might actually have been useful.  Small token, indeed!

It amazes me that people still produce ugly little desk calendars and that others take the time to build marketing campaigns around them.  These are not exactly salad days for the insurance industry.  They can't afford to waste a single mass mailing. 

Face it, the days of the desk calendar have long since disappeared.  Deal with it and move on.

Ernst & Young sued over Lehman's collapse

Here is the big news that might trigger your interest as an auditor.

One of the Big 4 accounting firms, Ernst & Young is facing a civil lawsuit in the US over the collapse of Lehman Brothers! New York's state attorney Andrew Cumo claims that New York's state attorney Andrew Cuomo claims Ernst & Young "sat by silently" as Lehman Brothers tried to conceal billions of dollars in debt from investors before its implosion. The lawsuit says Lehman ran a "massive accounting fraud".

It is claimed that Ernst & Young approved of Lehman's increasingly frequent use of a device known as Repo 105. The lawsuit alleges: "These Repo 105 transactions had no independent business purpose and were designed solely to enable Lehman to manage the company's financial balance sheet metrics."

The case centres on Lehman's use of an accountancy practice known as Repo 105, which involves temporarily removing money from the balance sheet to give the impression of greater financial strength. Mr Cuomo mentioned that, Ernst & Young should not have approved the accounts, knowing that the practice had been used so widely.

The lawsuit seeks more than $150 million in fees that Ernst & Young received from 2001 to 2008 as Lehman's outside auditor,plus other unspecified damages

Ernst & Young has responded, and claims that the firm is going to "vigorously defend" the lawsuit.

A Death in the Family

Scowling at the now empty stage, the man sat two thirds of the way back, as the audience, laughing and chatting, left for the lobby.  It was the end of Act I of the preview of the comedy "Jitters" at the SouPepper Theatre in Toronto.  I watched the man, concentrating on the stage as though the actors were still there.  In his mind they were.  This was the man who had woven together his own experience as actor and playwright and  had run this play through his mind a thousand times as he revised and revised, boiling it down to its essence.  This was David French.

I walked over to the row he was seated in and sat down a respectful distance away, not wanting to disturb his train of thought.  I had met David through an introduction to dramatic writing course given by his partner, Glenda MacFarlane and I had emailed them a couple of times.  After a while he acknowledged my presence.  "There's a lot of work to do yet," was all he said.  This despite all of the laughter that had just come from the full house.

David was like that:  intense, passionate, uncompromising, as much a rock as the place where he had been born.  When he visited our class, we all talked about our current projects.  When I described mine, he said, "A novel maybe, not a play."  He was right.  That comment made me start over from scratch, because after listening to him, all I wanted to do was write a play.  David's approach was classical theatre:  a single protagonist with an all-consuming desire, facing overwhelming conflict and equipped with only their intelligence and feelings.  "Salt-water Moon" (http://www.davidfrench.net/salt.html) features two actors on one set in one evening.  "The challenge," he explained, "was that this story took place before my previous play, so the audience already knew the ending."  Yet, even knowing not just the ending, but also the whole play, I was still riveted to my seat.  I took my family to see it at SoulPepper.  With two teenagers, it can be difficult to find something that engages all of us.  This play was an exception.  The conversation all the way home centered around the play and the two characters.

You can picture yourself in a French play.  Whether you see yourself as the parent or the child, the young lover or the frustrated patriarch, he spoke to all of us.  Each character is presented with understanding and compassion, true to all of the frailties and strengths of the human condition.  You can't leave one of David's plays untouched by the experience.

We will miss him.

Hmmm . . . Which Software Should I Learn?

Remember that famous career advice from "The Graduate"?


Mr. McGuire: I want to say one word to you. Just one word.
Benjamin: Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Plastics.
Benjamin: Just how do you mean that, sir?



Plastics was the gee whiz industry back then. A decade or so ago, Great Plains was the advice I received when I asked what product an accountant should specialize in. So, where should a graduating accountant go now?

Hunter Richards, in his Which Tech Skills Help Accountants Land Jobs, has answered the question. I won't steal his thunder. You'll just have to click on the link yourself!

Farewell CFO

"There are no mistakes in the universe, no accidents.  Everything has a reason,"

says my friend Alice, an astrologer.

Another way to look at it is that every moment, every experience, has a seed of learning and growth in it.  The challenge for us is to find it.

I have just come from a funeral where I didn't know anybody.  I was there in support of a friend, but we didn't end up connecting.

I just sat in the back and watched.  The largest room in the funeral home was two thirds full.  There were so many tears, so much grief:  men and women, young and old.  This man had clearly touched a lot of people.  As the service unfolded, I got a sense of his story.

Steven (not his real name) was cut down by cancer at the age of fifty-five.  He was an accountant, the Chief Financial Officer of his company.  His boss, the Chief Executive Officer and company founder, was the first to speak.  He described Steven as the mature one, the one who could make the numbers fit, the company's conscience.  He also spoke of Steven as one of the ones driving the company forward, having a solid grasp of where they could go and what they could achieve.

The second speaker represented Steven's hobby, ballroom dancing.  She spoke of Steven and Grace, his partner and wife, their spirit, and Steven's ambition to be the best.  Steven and Grace represented his adopted country at an international amateur competition and he was particularly proud to carry the flag in the opening ceremonies.

The third speaker was an old friend of Steven's from Hong Kong.  He spoke of Steven's other hobby, music, and the bands they had put together so long ago.  He also told a touching story about Steven's first date with Grace, when he spent a week's salary on a candle-lit dinner for two at a fancy restaurant, a large initial "investment" that had paid dividends for the rest of his life.

Steven was never awarded the Nobel Prize for Peace.  I doubt that the Wall Street Journal will note his passing.  He will not even be a footnote in this nation's history, yet he touched a lot of people deeply with his spirit, his willingness to help and his drive to be a better person.  The lesson for me, accountant, CFO, former amateur ballroom dancing enthusiast and amateur musician, was clear.

Maybe I should listen to a few more of the things my friend Alice says.

Crazy Quilt Career Advice

If you are in mid-career right now, does your past look like a crazy quilt?  A crazy quilt is a patchwork quilt with no design.  When you look back at the twists and turns your life has taken, do you find yourself asking, what happened to those wonderful plans I had when I was 20?

I know I did.

I looked back at the decisions I made and wonder, "What was I thinking?"  In my more charitable moments, I excused myself with the thought of how young I was at the time, how little of life I knew and, frankly, how little of myself I knew.

Middle age is the time when those thoughts come home to roost.  It gets harder to brush them away with the thought that you can do better next time.  As a friend said, "Middle age is when you realize that if you're going to accomplish anything in this life, you'd better start soon."

Look at the crazy quilts in this blog post.  They are haphazard and random, each piece bearing no relationship to the others.  And yet, the eye finds patterns.  The mind realizes that there is careful design behind the apparent randomness.

This past weekend, I attended a regional conference as a representative of the national office.  I took my trumpet along.  One of the wonderful things about working for a church is the amount of music we have at meetings.  In the middle of the afternoon, when eyes tend to glaze over, there's nothing better than someone saying, OK everyone, time to rise and sing.  Anyway, the musicians were more than happy to let me play along and the delegates were happy to hear the old favourites I tend to play.  It softened my image as the accountant from the national office, particularly in these days of budget cuts and staff reductions.  The music helped people see me as a person, not just an accountant.  It made me more approachable.

We have only so many hours in a life time.  When I look at how I have spent mine:  accounting, computer systems, family, charities, writing, church and yes, trumpet, it looks like quite a crazy quilt to me.  And yet, all of those things have come together in my current position.  Looking back, it's as though all those odd career detours I took were leading to this place.

When you look at your past, I hope you too can make some sense of your crazy quilt.