When I was eight years old, my father, who never completed college, decided to better himself by taking an accounting course at the local community college. He got so frustrated with it, and struggled with it so much that one day he was in his study and he just let out this holler and threw the accounting textbook across the room. Then again, maybe it was Calculus he was taking, not accounting. Whatever. Either way they are both awful and often necessary evils for the college student. I inherited my father’s artistic flair and numerical impairments, and so I too have trouble understanding the world of accounting. Especially their terms. It is, however, ironic how these terms can cross over to us creative folks who cannot crunch numbers or financially map out a corporation to save our lives. Some examples of this are listed below*, sure to get a cringe or a chuckle out of any accounting student.
A Misstatement is Inconsequential
If a reasonable person would conclude after considering the possibility of further undetected misstatements that the misstatement either individually or when aggregated with other misstatements would clearly be immaterial to the financial statements. If a reasonable person could not reach such a conclusion regarding a particular misstatement, that misstatement is more than inconsequential.
This is easy to understand. Basically all it is saying is that if a person lies to you once, chancesare they will lie again. I have had friends and lovers that I can say are representatives of a misstatement that is inconsequential. What does this have to do with accounting? This is everyday social reality, baby.
Adjusting Journal Entry
An accounting entry made into a subsidiary ledger called the General journal to account for a periods changes, omissions or other financial data required to be reported “in the books”.
While I am not quite sure what this means in accounting, I can tell you that there are a lot of adjusted journal entries in my life. There is plenty of financial data that has been required to be reported into our checkbook balancer and through receipts that I should have, but when it comes right down to it, I don’t want my husband to know where I spend some of our money. He would go through the roof and never let me go to Macy’s again. Marriage has a general journal. There is nowhere that states that we have to actually use it all of the time.
Explicit or implicit representations by an entity’s management that are embodied in financial statement components and for which the auditor obtains and evaluates evidential matter when forming his or her opinion on the entity’s financial statements.
Again, my husband may form an opinion on our financial statement, but that won’t stop me from shopping. He can be as assertive as he wants, that doesn’t stop the end of summer sales.
Sum of DEBIT entries minus the SUM of CREDIT entries in an ACCOUNT. If positive, the difference is called a DEBIT BALANCE; if negative, a CREDIT BALANCE.
In layman’s terms, we all have to find our balance in life. Some people owe us big time, and others we are eternally indebted to. You win some, you lose some, and we all just need to be okay with who we are in the end.
I don’t need to be an accountant to see how these terms still apply to me in my every day life. They cross over just fine. And who says I needed to be a business major to comprehend the terms to today’s business professionals?
* All accounting definitions come from New York State Society of CPAs. www.nysscpa.org