Social Climbing: Major Hindrance in Saving

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I have already enumerated some effective strategies that you can do to save money — whether you are a student or a typical individual. If you missed them, kindly click here and learn!

One of the major factors that hinder saving is social climbing. What is social climbing? As per the web definition, social climbing is the act seeking social prominence by obsequious behavior. I personally define social climbing as the act of excessive buying of stuff that is actually beyond your financial capability with the intention of showing and telling the world that you are on the high stratum of the social hierarchy.

A few individuals go to fine-dining restaurants. Some go to high-class shops and order venti-sized beverages. Some watch movies regularly. Some shop as if today is the end of the world. But few days after, they are thinking where to get money for their needs. And hours later, they found themselves knocking their friend's door and borrowing money. If they only just stay within their financial limit and be what they are, then they will not face these problems. 

Rich people can afford to eat in a fine-dining restaurants, to sip their favorite beverages and to watch movies regularly because they have the money, lots of excess money after considering their needs! And we must accept the fact that if we're not like them, do not buy things that are beyond our budget. Imitating someone's lifestyle is not bad at all. It is your money anyways. But the point is you must know how to be rich like them permanently not temporarily.

Being a social climber can indeed ruin the bridges to saving. When you save, you need to cut all the unnecessary expenses. How could you save if you spend more than what you need and what you earn? Saving does not mean closing your doors to luxuries. I just want to emphasize that if you really cannot afford a thing, do not buy it. Remember that if you have lots of funds and savings, you can buy the things that you want. Things can wait! Just be patient.

Fundamentals of Accounting Lesson #3: Generally Accepted Accounting Principles

Message: Sorry if it takes two days before I post this lesson. I'm kind of busy these past few days. :D

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Generally Accepted Accounting Principles (GAAP) pertains to the collection of accounting treatment in a particular country. I would like to emphasize that varies in different countries. The GAAPs that I will present to you are Philippine GAAP. But worry not! Because the Philippines is patterning its GAAPs from the International Financial Reporting System (IFRS) [this is the basis of majority of the countries in the world].

Below is the list of the most common GAAPs that you must know.

1. Monetary Unit Concept - it simply states that all of the information presented in any accounting products must be in the unit of money. The unit of money is the currency used in a country. Say you're from Korea, all of the amounts must be in Korean Won. If your company has a dollar account, you must convert it into Korean Won when you have to prepare the Financial Statements.

2. Periodicity Concept - this states that the indefinite life [see the next GAAP] of an entity is divided into accounting periods. The end of each accounting period shall determine when financial statements are to be made.

 If an entity chooses to have a calendar year (i.e., the period that starts from January 1-December 1 of the same year), it must prepare financial statements at the end of the year. On the other hand, if an entity falls under the fiscal year, this means that its accounting period is good for one year. There are other accounting periods to choose from like quarterly (every three months), monthly and bi-monthly.

3. Going Concern - it states that unless otherwise there is an evidence to the contrary, the entity will continue for an indefinite period.

4. Accrual Basis of Accounting - it states that revenues and expenses shall be recorded and recognized at the time when they are earned and are incurred respectively regardless when the actual payment is made. Say Mr. James purchased a car from Toyota in an installment basis, even though Mr. James has not yet paid the car in whole amount, Toyota shall recognize a revenue equal to the car purchased. Another example: today is November 2013 and an interest expense is scheduled to be paid in January 2015. Even though that the entity has not yet paid the interest, it must still record the accrual of the expense.

5. Cash Basis of Accounting - this is the opposite of the former. It recognizes expenses and revenues when they are paid. This treatment is only used for tax-purposes of accounting. 

6. Business Entity Concept - this means that an entity is considered to be separate and distinct from its owner/s and other related businesses. Example: Mr. Ng owns a business and he wants to buy an iPad for personal purposes, he cannot recognize the cost of his iPad as an expense of the company. 

Other things that you must know:

What are the three basic forms of the business? They are single proprietorship (owned by only one proprietor), partnership (owned by two or more owners) and a corporation (owned by stockholders). You will learn them soon. :D

What are the different types of business? Service, Merchandising, and Manufacturing. They are self-explanatory, I assume.

Who are the users of financial information? The major user of the financial information from the statements is the management. This shall help them to evaluate whether the business is expanding or not. Creditors and suppliers also need to know how liquid and financially stable the entity is to decide whether they are going to approve their credits. Government must know also how the company gains profits or realizes losses for the computation of taxes. Some government agencies include Securities and Exchange Commission, Bureau of Internal Revenue and Department of Trade and Industry. Employees might also want to know the profitability of the company so they can evaluate whether it is capable of giving better remuneration. Investors are also one of the users of financial information so they can determine whether to invest their grants in the business or not.

This ends our discussion

oOo

ASSESSMENT

Self-evaluation (just pm me if you want to know your score)

1. If Ms. Julie rendered service to Mr John in March and she received the payment in May, when shall Ms. Julie record the revenue from the service?

2. Mr. Josquine, an auditor hired from Isla Lipana, returned the Financial Statements (FS) in  of Brown Company in Renminbi. It is a Chinese company which is currently operating in the Philippines. Why did Mr. Josquine reject Brown Company's FS? Support your answer.

3. Consider the following: 

• You had rendered your service for Php 500.00 then you received the payment three days after.
• Reik Company paid you its balance from its past transaction. You received Php 1,000 cash.

 QUESTION: How much is your revenue for the day? Support your answer.

4. Can we consider a calendar year as a fiscal year?

5. Imagine you are the company messenger. You are asked to go to a bank to deposit the earnings of the company for the day. On your way to the bank, you ran out of fuel and this compelled you to purchased three liters of diesel for your motorcycle. Can the company record your expense for your motorcycle? Why or why not?

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next topic: the components of financial statements. One lesson to go, and we're already on the rules of debit and credit a.k.a. the double-entry system. 

Sorry guys if I wasn't able to make the definition of terms. ^___^v

xoxo

Fundamentals of Accounting Lesson #2: Careers in Accounting

This lesson is warmly brought to you by yours truly, Josquine Alviar Diaz. Thank you for reading this blog post. Hope you like it. ^_____________^ xoxo

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Why do you choose accounting? After graduating, what road are you going to take? This lesson aims readers to familiarize themselves to accounting's wide job opportunities. For simplicity and to make it easier to understand, I'll be only discussing this in bullets. :D

• Public Accounting - accountants who are said in this field are rendering their services for a fee. All individuals in this field (if you are in the Philippines) must be a Certified Public Accountant. An accountant in public accounting can be an auditor. Auditing involves independent analysis of firms' financial statements and expressing an opinion about firm's accounting treatments and procedures. One can also be in Tax Services which provides the preparation and filing of required tax returns of a firm. Management Advisory Services entails giving services to related clients on matters that are pertinent to the design and maintenance of a company's accounting policies and system, budgeting, production, cost accounting and other economic matters of the company. In layman's term, it encompasses Finance. 
• Private Accounting - this is the exact opposite of Public Accounting. Private Accountants are employed by private entities and other not-for-profit organizations. General Accountants (i.e. those who are responsible until the end of the accounting cycle) are said to be in this field. Other examples are bookkeeper, accounting clerk, management accountant and the like.
• Government Accounting - from the word itself, this is the field for those who are working in any governmental unit like the Securities and Exchange Commission, Bureau of Internal Revenue and the like.
• Accounting Education - this includes accountants that are employed as accountant, professors, instructors and reviewers (I hope blogger too. ^^) Just like the others, only Certified Public Accountants are only allowed in this field.

This ends our lesson for today. I will post a different blog entry about this and I will tackle more about their salary and their pros and cons. I won't make a definition of terms here anymore. :D 

oOo

Two lessons more and we will now move on to the rules of debit and credit. Yeah!!

Fundamentals of Accounting Lesson #1: Introduction to Accounting

Note: I will be posting Accounting Lessons on my blog regularly. Information presented on every topic is guaranteed to be true and reliable. Fundamentals of Accounting shall supply its readers a strong foundation in accounting. Furthermore, this shall tackle the complete accounting cycle. After completing this course, students are expected to be knowledgeable in journalizing (the rules of debits and credits), in different accounting tools like worksheet and in the preparation of basic financial statements. Hope this blog will be of help in your accounting journey! 

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Definition of Accounting

As defined by the Accounting Standards Council, accounting is a service activity. Its function is to provide quantitative information primarily financial in nature, about economic entities, that is intended to be useful in making economic decisions, in making reasoned choices among alternative courses of actions.

In layman's term, accounting is the language of business. Without accounting, firms cannot track/evaluate their performance. Firms evaluate their performance with the use of a tool called financial statements. Financial statements are said to be the end product of accounting.

Actually, accounting has three main phases: bookkeeping/recording, summarizing, and communicating. Bookkeeping is the process of maintaining the record of all transactions. Summarizing involves the preparation of financial statements which include Statement of Comprehensive Income, Capital Statement, and the Statement of Financial Position. Financial statements are said to be the end product of the accounting cycle. Communicating involves imparting information from the financial statements to the related users.

How Accounting Processes Evolve

Accounting started even during Biblical Times. Archaeologists trace its roots during the Mesopotamia Era where tradesmen used clay objects as their medium of exchange. Clay tablets marred with certain symbols and figures were also seen that were believed to be their means of recording their daily business transactions. 

Egyptians, Greeks and Babylonians recorded their business transactions on a water plant called the papyrus. Records showed labors wages, payments and purchase requisitions. During this time, men used only single amount with a little description beside.

In 1494, the world of accounting boomed when an Italian mathematical monk Friar Luca Pacioli published his book entitled as Summa de Arithmetica, Geometrica, Proportioni et Proportionality (Everything About Arithmetic, Geometry, Proportions and Proportionality). This book thoroughly tackles the existing mathematical knowledge existing at that time. It also introduces the concept of debit and credit which is popularly known as the double-entry system. Because of his work, Pacioli is considered to be the Father of Accounting.

Accounting continually grows even today. As a matter of fact, the International Accounting Standards Board (IASB) yearly changes and reviews its issued accounting standards due to the world's changing economic requirements and countries' varying cultures. This shall be discussed further on my Intermediate Accounting Lessons. :D

This ends my first lesson in Fundamentals of Accounting. Do not forget to share this to everyone you know having a hard time in Accounting. Because I will be here to join you in your Basic Accounting journey (hopefully in your entire Accounting journey) and I will strive hard to make it easy for you to understand. If you have questions and/or suggestions, please do leave comments and I will be happy to answer them.

For some reasons, you may also want to consider the Definition of Terms in every lesson!

Definition of terms:

• Accounting - is said to be the language of business. Accounting is a service activity and its function is to provide related users quantitative information, primarily financial in nature, that is intended to be useful in making economic decisions and in making reasoned choices among alternative courses of actions.
• Bookkeeping - is the process of maintaining the record of all business transactions.
• Communicating - involves imparting information from the financial statements to its related users.
• Financial Statements - this primarily includes the Capital Statement, Income Statement, Balance Sheet, Statement of Cash Flows and Notes to the Financial Statement.
• Friar Luca Pacioli - an Italian monk who published the book Summa de Arithmetica, Geometrica, Proportioni et Proportionality (Everything About Arithmetic, Geometry, Proportions and Proportionality). He is considered to be the father of Accounting.
• Summarizing - involves the preparation of financial statements which include Statement of Comprehensive Income, Capital Statement, and the Statement of Financial Position. 

As a self-evaluation, you may also want to answer these questions:

1. Who is the father of Accounting?
2. What is the book that tackles mainly the concept of the double-entry system?
3. Discuss the three main phases of Accounting.

And let me end this lesson with a green joke: 

WHO IS THE FIRST ACCOUNTANT?

WHO????

ADAM. BECAUSE HE MADE THE VERY FIRST ENTRY. :D

Have a nice day everyone!

Is Accounting the Right Course for You?

You are probably a graduating high school student and you are about to enter one of the most vital parts in your life, college. As of now, you are thinking what path are you going to take? Perhaps, you have already made up your mind and decided that you are going to explore the world of accounting. But wait! Think twice before you end up to changing your course.

Accounting is indeed a cumbersome profession. Diligence is one of the basic requirements in accounting. There is no room for “I give up.” You must be ready for the possible sleepless nights and overtimes because the usual working hours in the office may not be enough for you to finish the work. As an accountant, you will receive tons of papers such as receipts, payment vouchers, and other source documents which are in need to be analyzed. Remember that the basic foundation of accounting is bookkeeping so it is very important for you to properly manage these documents.

Aside from diligence, you must also be organized. After receiving these source documents, you would have to file them properly. There will come a time that your boss will question you where does this particular amount come from. And as accountant, you must know where to locate the source document that your boss is asking for. If you have not filed and organized the documents well, you would end up finding it out of thousands of source documents or fail to present it to your boss. And the management will now decide to fire you because of your irresponsible bookkeeping.

You must also ask yourself if you are good in analysis. Contrary to many people’s belief, accounting requires an excellent analysis rather than skills in complex mathematics. Accountants use some techniques like interpolation, work-back method and the like just to derive the needed amount. In accounting, there are no specific and fixed methods on these. It is up to you and your analysis.

But this does not necessarily mean that accounting does not need mathematics at all. You must also be good in financial mathematics. Financial mathematics involves the computation of simple and compound interest, and annuities like ordinary, deferred and due. Accountants prepare schedule of loan amortizations and such so you must have a strong foundation of knowledge with this kind of mathematics.

Computer skill is also a requisite to become an accountant. In today’s time, some firms are not using journal, ledgers and worksheet anymore. Instead, accountants are now using software called SQL to keep their accounting records. SQL is a little bit confusing so you must know how to operate this software as early as possible. In some situations, accountants are using excel. You must be knowledgeable in creating and entering formulas here.

After considering these, do you still want to be an accountant someday? The decision is still up to you; and always remember that there is no room for giving up in accounting.

Tips on How to Save Money (For Students)

Students' budget is limited. Some parents only give their children their allowance for the month or just even for a week. Sometimes, these students want to buy their favorite clothes or just want to eat with their friends in a mall but they actually can't because of their limited budget. This is where the importance of saving is contemplated. So I want to share you my top secrets on how to save money as a student and I hope this would be helpful to you:

PAY ALL YOUR DEBTS

The first thing to do is to settle all your debts. Imagine this: you are saving for a new cellular phone. After three months of successful saving, you are now ready to buy your new phone. But wait, there's more! Someone knocked on your door and he is compelling you to pay for your one-year-old debt that actually amounts to your savings. How would you feel?

KNOW YOUR GOAL

Why do you want to save? Do you want to buy a new cellular phone? Or you just want to save to establish a strong liquidity? Always bear in mind that savings shall be meaningful. Some students save, say for a new phone, but when they see other things, they are often tempted to buy them. At the end, they fail to save for a new phone. When you set your goals, never get distracted by something. Always evade temptations.

MAKE A BUDGET LIST

Know your expenses for the week. It is better if you will write them on a paper or even on a notebook. This helps you to evaluate yourself if you are spending too much. It also pays to record all of the things you bought even a piece of candy or just an order of potato fries. A week after, compare your actual expenses and the expenses that you have listed. You will surely find a big difference!

EXPENSES=MONEY INCOME-SAVINGS

A basic economic equation states that savings is the the difference of money income and expenses. But I highly recommend you to use the above equation instead. As soon as you get your allowance, settle immediately your savings. And the remaining amount would be for your expenses. It is totally up to you how to budget it. Just make sure that when you ran out of money for your expenses, you do not use your savings.

USE 50-30-20 FORMULA

This means that you have to settle 50% of your allowance for your expenses, 30% for your unexpected expenses like school projects, and 20% for your savings. After a week and you found out that the 30% is still there or has an excess, do not spend it yet. Make it as your savings instead. I highly recommend this for those who cannot obey the former formula.

OPEN A SAVINGS ACCOUNT

This is very necessary. Opening a savings account also minimizes the probability of your spending. The more you see money on your hand, the more urge you feel of spending it. So the best way to do, is to hide/keep it far from your sight.

STAY WITH FRUGAL FRIENDS

They say Tell me who you're friends are and I will tell who you are.When you are with spendthrift people, you might absorb their attitude of spending lavishly! So it's better to stay with your frugal friends when you are saving. You might consider studying with them in the library or just go to a park instead to a mall.

KEEP A HECTIC SCHEDULE

Simple logic. When you are busy and focused to something, you are far from tempting. Instead of hanging out in a mall, why don't you do and finish your assignments and projects? I also believe that when you are bored, you tend to seek for a place that will reinvigorate you like arcades and Karaoke Hub.

USE DIFFERENT JARS

When I applied this method, I could say that I had maximized my savings drastically. I used two wallets for my expenses. One is for my fare and the other one is for my food allowance. I made it to the point that whatever happened, fare is only for fare and food is only for food — regardless whether the jeep driver has no coins for my change.

These are just some of practical ways of spending and saving money. Always remember that saving comes with a wise spending. The two are always intertwined.