Language, J. M.
A icle
Mode n inancial s a emen s oo complica ed o manage s
and laymen: A c i ical su ey
Sou h A ican Jou nal o Business Managemen
P o ided in Coope a ion wi h:
Uni e si y o S ellenbosch Business School (USB), Bell ille, Sou h A ica
Sugges ed Ci a ion: Language, J. M. (1985) : Mode n inancial s a emen s oo complica ed o
manage s and laymen: A c i ical su ey, Sou h A ican Jou nal o Business Managemen , ISSN
2078-5976, A ican Online Scien i ic In o ma ion Sys ems (AOSIS), Cape Town, Vol. 16, Iss. 1, pp.
40-45,
h ps://doi.o g/10.4102/sajbm. 16i1.1071
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/217886
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Modem
mancial
s a emen s
oo
complica ed
o
manage s
and
laymen
a
c i ical
su ey
J.M.
Language
Depa men o Business Managemen , Uni e si y o T anskei, Um a a
This a icle is
an
a emp
a
sc u inizing accoun ing p ac ice
in Sou h A ica. Fi s ly, he au ho demons a es ha he
Company
Law
in Sou h A ica is ai ly ague ega ding he
o ma
and
o mula ion
o
inancial s a emen s. Ques ions
ega ding he gene al use
o
e ms,
and
mo e speci ically
'gene ally accep ed p ac ice',
a e
aised. Finally, he au ho
discusses some unaccep able aspec s o ecen
p esen a ion o accoun ing s a emen s.
S.
A .
J.
Bus. Mgm . 1985,
16:
40
-45
Hie die a ikel is
'n
poging om die huidige ekenmees e s-
p ak yk k i ies e onde soek.
Die
sk ywe oon ee s ens
aan
da die Maa skappyewe
in
Suid-A ika edelik
aag
is oo
die sames elling o o maa
an
inansiele jaa s a e.
V ae
wo d ges el
na
algemene e me
en
die sogenaamde
'algemeen aan aa de p ak yk'. Laas ens wo d onaan aa ba e
aspek e
an
die hedendaagse oo s elling
an
ekenkundige
s a e k i ies besp eek.
S.-A . Tydsk . Bed y sl. 1985,
16:
40-45
J.M.
Language
Depa men
o
Business
Managemen ,
Uni e si y
o
T anskei
P i a e
Bag
XS092,
Um a a '
Accep ed
Augus
1984
A
b ie
his o ical
su ey
o
bookkeeping
The a and science
o
co ec ly eco ding in books
o
accoun
all hose business ansac ions ha esul in he ans e
o
money
o
money's wo h, appea
o
ha e exis ed
in
a c ude
s a e om e y ancien imes. 'Venice, howe e ,
is
conside ed
o be he bi hplace
o
he
modem
sys em' (Wul sohn &
Ca e , 1947:l).
'In
1494
o
1495, Lucas Pacioli, a F anciscan monk,
o he wise known as Lucas de Bu go
and
Lucas
di
Bo go, published in I alian he i s known ea ise on
book-keeping. I was en i led
De
Compu is e Sc ip-
u is
...
Venice,
Genoa
and
o he owns
o
I aly we e
he i s o p ac ise bookkeeping by double en y . . .
Pacioli's wo k was ansla ed in o English by Hugh
Oldcas le
and
published in
London
in 1543. James
Peele w o e in
1553
a wo k
on
How
o keep a Pe ec
Accomp e
o
Debi ou and C edi ou . In
1795
Edwa d
Jones published his English Sys em
o
Bookkeeping
which in oduced wo columns in o he Jou nal ins ead
o
one as o me ly, he T ial Balance,
and
he Bough
and
Sold Day Books . . .
Modem
addi ions a e he
Double Accoun Sys em, he accoun s
o
Join S ock
Companies, he Tabula Sys em
and
Ledge balancing
by means
o
agg ega e accoun s (Con ol Accoun s) o
"Sel -balancing Ledge s". (Wul sohn & Ca e ,
1947)
Nowadays a e minological di e ence
is
d awn be ween he
bookkeepe
and
he accoun an . The bookkeepe
is
hough
o
as he pe son who a ends
o
he ac ual ou ine
o
cle ical
du ies ele an
o
he keeping
o
he books, whe eas he
accoun an
is
hough
o
as he unc iona y who co-o dina es
all he in o ma ion e ealed by he subsidia y books and
moulds his in o ma ion in o meaning ul accoun ing s a e-
men s. Du ing he las ew decades managemen accoun ing
has been e ol ed o assis managemen wi h in o ma ion o
manage ial decision-making
and
con ol.
Rela i e
silence
o
he
Companies
Ac
ega ding
he
cons uc ion
o
ac ual
o ma
o
annual
inancial
s a e-
men s
Nei he he Companies Ac No. 46
o
1926
no he Companies
Ac no.
61
o
1973
exp ess hemsel es speci ically and explici ly
on
he ac ual layou , cons uc ion,
o
o ma
o
he annual
accoun ing s a emen s. By annual accoun ing s a emen s one
has in mind he ading accoun , he p o i
and
loss accoun
(alias income s a emen )
and
he balance shee (Go e nmen
P in e ,
1941
& 1973).
The main conce n
o
bo h
ac s was
o
ensu e ha o he
sake
o
in e es ed pa ies:
s.
A .
J.
Bus.
Mgm .
1985,
16(1)
(i)
In he case
o
he
1926 Ac , he p o i
and
loss accoun
' . . .
he
accoun e lec s a
ue
s a emen
o
he p o i
and loss
o
income
and
expendi u e, as he case may be,
o he pe iod conce ned'
and
as ega ds he balance shee
' . . . i shall
be
d awn
up
o
exhibi a
ue
and
co ec
iew
o
he
company's
s a e
o
a ai s as
a
he da e
o
he balance shee . . . '
As ega ds
he
e ms
' ue
s a emen ' and ' ue and co -
ec iew' in
he
abo e p o isions
o
he 1926 Companies
Ac , i should be
no ed
ha
subsequen amendmen s
o
he Ac in oduced a change in e minology.
Acco ding
o
Henochsbe g & Fai bai n (1953:241), he
wo ds ' ue and ai
iew'
we e in oduced in Sec ion 74
o
Ac
No.
46
o
1952
o
eplace he wo ds
' ue'
and
' ue
and
co ec iew' as hey appea ed in he
1926
Companies Ac as amended.
(ii)
In
he
case
o
Companies
Ac No.
61
o
1973
he idea
o
' . . . con o mi y wi h gene ally accep ed p ac ice . . .
',
gene ally accep ed accoun ing p ac ice (GAAP) was in o-
duced in
o de
o
' . . . ai ly p esen he s a e
o
a ai s
o
he
company
and
i s business as
a
he end
o
he
inancial yea conce ned
..
.'
(Schoeman, 1973).
The
ele an sec ions in
he
1973 Ac ead as ollows:
'286(3)
The
annual
inancial s a emen s
o
a
company
shall, in
con o mi y
wi h gene ally accep ed
p ac ice, ai ly p esen he s a e
o
a ai s
o
he
company
and
i s business as
a
he end
o
he inancial
yea conce ned
and
he p o i
and
loss
o
he company
o
ha
inancial yea
and
shall o
ha
pu pose be
in acco dance wi h
and
include
a
leas he ma e s
p esc ibed by Schedule 4 in so a as hey a e
applicable,
and
comply wi h any o he equi emen s
o
his
Ac .
286(4)(a)
Any
di ec o
o
o ice
o
a company who
ails
o
ake all easonable s eps
o
comply
o
o
secu e
compliance wi h he p o isions
o
his sec ion
o
wi h
any
o he
equi emen s
o
his Ac as o ma e s
o
be s a ed in
annual
inancial s a emen s, shall be guil y
o
an
o ence'.
Sec ion 90
o
he
1926 Companies Ac (as amended) and
Schedule 4
o
he
1973
Companies Ac , spell ou wha speci ic
i ems should
a
leas
be
included
o
disclosed in he inancial
s a emen
bu
as ega ds he mould
o
o ma hese s a emen
should assume,
he
Ac
is
silen .
The
jumping
abou
wi h
e ms
F om
he·
abo e
i appea s
ha
he legisla o s ha e dilu ed
hei e minology as ega ds he gene al equi emen s
o
annual
inancial s a emen s. In pa icula , hey ha e shied
away
om
he equi emen
' ue
and
co ec iew'. By he
1952
amendmen
o
Sec ion 90
o
he Companies Ac , one
inds
he
wo d 'co ec ' d opped.
A
ha s age, he wo d
' ai ly' supe seded
he
wo d 'co ec '
and
om ha poin
o
ime
one
had
he
si ua ion
ha
books
o
accoun and annual
accoun ing s a emen s
had
o
be ' ue and ai ' as ega ds hei
e lec ion
o
he s a e
o
a ai s
o
he company.
The
1973
Companies
Ac wen u he and dispensed wi h
he equi emen
' ue'.
Ins ead, he
1973
Ac by in oducing
he e ms ' ai ly p esen ' became mo e gene al and coined a
e m
o
which
he
in e p e a ion could become a deba able
poin . As ega ds hese di e en e ms, a conside able measu e
o
jumping
abou
on
he pa
o
he legisla o s was exe cised.
The implica ion
is
no
ha he choice
o
he equi emen ' ai '
was
no
a
good
one.
On
he con a y, he e m
' ai '
can be
41
ega ded as easonable om he poin
o
iew
o
he
p ac i ione ' . . . since mos accoun s depend in
pan
upon
alua ions which in he na u e
o
hings a e la gely a ma e
o
opinion, and a e a ec ed by economic ci cums ances
beyond he con ol
o
he di ec ion
o
any one en e p ise'
(B ay & Sheasby, 1947).
The
e ms
' ue',
'co ec ',
and
' ai '
Ob iously, wha
is
no ue,
is
alse. Also wha
is
no co ec
is
inco ec
o
w ong, ha
is,
no ee om aul s. Appa en ly
wha p omp ed he minds
o
he legisla o s was ha audi ed
accoun ing s a emen s could no be ee om aul s in he
absolu e and he e o e he no m
o
' ai ly' p esen ing he s a e
o
a ai s
o
he company was ega ded mo e p ope
and
easonable. The wo d ' ai ' could ha e se e al meanings bu
in he con ex
o
he Ac i would appea ha he annual
inancial s a emen s, seeing ha hey p obably canno
o
need
no be
' ue
and co ec ', a e equi ed
o
be a p e y good
o
easonable and accep able e lec ion
o
he inancial
pe o mance and si ua ion
o
he company. In i s s uggle wi h
he obscu i y
o
wha comp ises ' ai p esen a ion'
o
accoun ing s a emen s, he Ac inds i sel ha.,ing
o
has en
o shel e
o
a somewha ague concep , namely, ha
o
' . . . gene ally
accep ed
accoun ing
p ac ice
...
'
(Schoeman, 1973).
The
ques ion
o
gene ally
accep ed
accoun ing
p ac ice
An Accoun ing P ac ices Boa d was es ablished some ime
ago bu he
au ho
could no ace he exac da e
on
which
his Boa d came in o being. This Boa d p obably came
o
be eo ganiz.ed subsequen o he
1973
Companies Ac .
'The
Accoun ing P ac ices
Boa d
consis s
o
ep esen a i es
o
he Na ional Council
o
Cha e ed
Accoun an s (SA), The Public Accoun an s'
and
Audi o s' Boa d, he Johannesbu g S ock Exchange,
he Associa ion
o
Chambe
o
Comme ce
o
Sou h
A ica, Die A ikaanse Handelsins i uu , The
Sou h
A ican Fede a ed Chambe
o
Indus ies,
The
Chambe
o
Mines
o
Sou h A ica, and he S eel
and
Enginee ing Indus ies
o
Sou h A ica.
S a emen s
o
s anda d accoun ing p ac ice a e d a ed
by he Na ional Council
o
Cha e ed Accoun an s
(SA) and hen submi ed
o
he Boa d o conside a ion
and,
i
app o ed, au ho ized o issue. The de ini i e,
p e e ed
o
al e na i e accoun ing ea men s se
ou
in s a emen s issued unde he au ho i y
o
he Boa d
a e conside ed gene ally accep ed accoun ing p ac ice'
(Na ional Council
o
Cha e ed Accoun an s, 1978).
The Accoun ing P ac ices Boa d (APB) he ea e issued
a se ies
o
s a emen s
on
wha hey ega ded as gene ally
accep ed accoun ing p ac ices. These s a emen s co e ing
Sec ions 1.001-1.007 and issued du ing 1974,
1975,
and 1976,
elabo a e such aspec s as disclosu e
o
accoun ing policies,
he ea men
o
axa ion in he inancial s a emen s, he
ea men
o
ex ao dina y
and/
o
abno mal i ems,
and
guidelines o he de e mina ion
o
ea nings pe sha e in
an
a emp
o
ensu e a ai
and
compa a i e base o e alua ing
cu en esul s.
The
impo an poin
o
keep in mind
is
ha despi e he
nume ous illumina ions
o
he Accoun ing P ac ices Boa d,
his Boa d nowhe e p esc ibes any o m
o
s uc u e wi h
which he a ious annual inancial s a emen s should comply.
Unde sec ion 1.003
an
appendix
is
a ached
o
illus a e he
ea men ' . . .
o
ex ao dina y i ems
and
p io yea
42
adjus men s' (Na ional Council
o
Cha e ed Accoun an s,
1978).
Wo hy
o
no e
is
he ac ha his pa icula appendix
is
o gene al guidance and does no o m pa
o
he S a emen .
The signi icance
o
his e i able illus a ion o he
accoun ing p o ession
is
ha a i hme ically a leas he
sequence
o
ea ing he igu es
is
om he op
o
he bo om
which
is
logical.
Acco ding o
an
inse ci cula issued
o
he accoun ing
p o ession da ed Feb ua y 1978, he Accoun ing P ac ices
Boa d (1978) sough Senio Counsel's opinion
on
wo
impo an ques ions conce ning he p oblem
o
gene ally
accep ed accoun ing p ac ice.
The i s ques ion was whe he compliance wi h s a emen s
o
gene ally accep ed accoun ing p ac ice (GAAP}, issued by
he APB, cons i u e compliance wi h he
GAAP
equi emen s
o
he Companies Ac 1973?
Acco ding o he ele an ci cula
o
so-called s a emen
issued by he Accoun ing P ac ices Boa d du ing Feb ua y
1978
' . . . Senio Counsel
is
o
he opinion ha , ha ing
ega d o he p ocedu e adop ed by he
APB
in conside ing
and app o ing
GAAP
s a emen s and he composi ion
o
he
APB, ha o he ex en ha a company in d awing up i s
inancial s a emen s complies wi h, and an audi o
in
ca ying
ou
his
du ies ollows, a s a emen
o
he APB hey 'can sa ely
assume ha hey ha e complied wi h he p o isions
o
he
Companies Ac in espec
o
gene ally accep ed accoun ing
p ac ice' (Na ional Council
o
Cha e ed Accoun an s, 1978).
The abo e opinion
o
Counsel
is
undamen ally based
on
wo explici backg ound condi ions
o
conside a ions, namely,
he p ocedu e adop ed by he APB,
and
ha ing ega d o he
composi ion
o
he APB which appea s o be ai ly
ep esen a i e
o
eminen bodies in he ield
o
accoun ing,
inance, and comme ce in Sou h A ica.
The second ques ion
on
which he opinion
o
Senio
Counsel was sough was whe he non-compliance wi h hese
s a emen s (by he APB) cons i u e
[d]
a con a en ion
o
he
GAAP
equi emen s
o
he Companies Ac ,
1973.
I
is
appa en ha he Accoun ing P ac ices Boa d in sub-
mi ing his second ques ion o he opinion
o
Senio Counsel
sough o cla i y, and qui e sensibly a ha , i s own powe
o p esc ibe wha in ac ual ac cons i u ed 'gene ally accep ed
accoun ing p ac ice'.
The ac
is
ha in e ms
o
he exp essed
iew
o
Senio
Counsel, he Accoun ing P ac ices Boa d could no ha e a
gene ally p esc ip i e igh
o
he accoun ing p o ession
ega ding wha
in
ac cons i u ed 'gene ally accep ed accoun ing
p ac ice'. Na ional Council ( 1978) exp essed i sel as ollows:
'Senio Counsel exp essed he opinion ha
' he
ques ion whe he any pa icula p ac ice complies wi h
he s a u o y equi emen s emains a ma e
o
ac and
o
p o essional opinion o be decided upon he me i s
o
each pa icula case
and
he exis ence
o
an
APB
s a emen he e o e cons i u ed e idence
o
wha
gene ally accep ed accoun ing was, bu need "
...
no
necessa ily be decisi e". I he e o e does no
necessa ily ollow ha non-compliance wi h he s a e-
men s by he
APB
will
cons i u e a con a en ion
o
he equi emen s
o
he Companies Ac '.
The concep 'gene ally accep ed accoun ing p ac ice'
appea s o be
an
e olu iona y a he han a s a ic one.
Consequen ly, he accoun ing p o ession seems o
be
enjoying
a wide measu e
o
lexibili y and disc e ion ega ding he
ac ual design
o
composi ion
o
annual inancial s a emen s
p o ided
a
leas hose ma e s p esc ibed by he Ac a e
S.-A . Tydsk . Bed y sl.
198S,
16(1)
e ealed.
'Counsel . . . also poin ed
ou
ha
s a emen s issued
by he
APB
we e likely
o
win g owing accep ance
om he p o ession
and
he business communi y.
Consequen ly a p ac ice which
'' oday
may be ega ded
as wi hin he limi s
o
he pe missible, al hough
i
is
no in acco dance wi h he s a emen
o
he Boa d,
may well wi hin a ew yea s
o
less be ega ded
as
alling ou side hose limi s" ' (Na ional Council
o
Cha e ed Accoun an s, 1978).
The
opinion exp essed in he i s pa
o
he abo e
commen was pe haps somewha o e op imis ic because he
la ge audi ing i ms ha e
in
he mean ime ei he adop ed
hei own s anda dized pa e n
o
p esen ing inancial
s a emen s
o
ha e issued guidelines
o
i s a ious o ices.
Unaccep able
aspec s
o
he
modem
way
o
p esen ing
accoun ing
s a emen s
Whils he ques ion
o
wha cons i u es 'gene ally accep ed
accoun ing p ac ice' appea s
o
be
a luid one and mainly
conce ns ce ain legal disclosu e equi emen s, ce ain aspec s
o
he
'modem'
gla ingly quee a i hme ical sys em
o
p esen ing he ac ual igu es by ce ain sec ions
o
he
p o ession becomes a ma e which canno escape un a ou -
able commen .
The con usion caused by he adi ional
T-shaped
balance shee
The adi ional T-shaped balance shee wi h liabili ies on he
le -hand side
and
asse s
on
he igh -hand side was one
o
he mos con using inconsis encies he accoun ing p o ession,
pa icula ly in G ea B i ain
and
i s dominions, including
Sou h A ica, e e commi ed.
The
Socie y
o
Inco po a ed Accoun an s was o med
in
1885
in B i ain
and
he e
is
no
e idence
o
sugges ha
e en
hen he liabili ies we e no ma shalled
on
he le -hand side
and
asse s
on
he igh -hand side (B ay & Sheasby,
1947).
'In
p ac ice, he liabili ies a e placed
on
he le hand
side
o
he Balance Shee
and
he asse s
on
he igh ...'
I should
be
emembe ed ha he balance shee
is
no
an accoun and does no equi e
"D ."
and
"C ."
...
"I
is
a s a emen
a
a gi en da e showing he inancial
posi ion
o
a business" ' (Hu chinson & Tuns all,
1926:64).
The
illogic
o
all his
is
e y ob ious. The ial balance
was
ex ac ed om he ledge wi h debi s (including asse s) on he
le -hand side
and
c edi s (including liabili ies)
on
he c edi
o
igh -hand side,
bu
when his ial balance was educed
o
a ne -p o i igu e
and
he emainde
o
he i ems aken
o
he balance shee , he debi s
and
c edi s we e en e ed c oss-
wise
on
opposi e sides
o
he balance shee as i he balance
shee was indeed
an
accoun
and
no a s a emen .
This piece
o
undeligh ul illogic con used and us a ed
many a s uden
o
accoun ing
and
i
has immensely
complica ed eaching
o
he subjec . Con on ing he
accoun ing p o ession o
an
explana ion
o
his gla ing
inconsis ency in a iably elici ed he unsa is ac o y s ock answe
ha '
...
his was adi ion
and
an
accoun ing con en ion'·
These olics
o
dodging he issues had he e ec
o
making
accoun an s he sec e laughing s ock
o
so many o e so
many
decades. I mus also ha e cos he p o ession and he subjec
much by way
o
appeal
o
p ospec i e s uden s
and
p ac-
i ione s alike.
S.
A .
J.
Bus. Mgm . 1985,
16(1)
The
quie wi hd awal o he headings 'liabili ies'
and
•asse s'
om he balance shee
The Council
o
he Ins i u e
o
Cha e ed Accoun an s in
England
and
Wales, 1942 -1946, ecommended, wi h
e e ence o accoun ing p inciples, ha :
'The use
o
gene al headings o a balance shee , such
as "liabili ies"
and
"asse s"
is
inapp op ia e and un-
necessa y.
The
a ious i ems, wha e e may be hei
sequence
o
designa ion, should, howe e , be
g ouped
..
.'
(B ay & Sheasby, 1947:204).
This
ecommenda ion he alded he p ac ice
o
g ouping like
i ems unde such headings as cu en liabili ies, cu en asse s,
ixed
asse s, e c. Howe e , he a ious g oups
o
liabili ies
we e
s ill shown
on
he le -hand side
o
he balance shee
and he asse s
on
he igh .
Al hough he g ouping sys em was a de ini e s ep in he
igh di ec ion om he poin
o
iew
o
using accoun ing
s a emen s o manage ial pu poses, he absu di y
o
lis ing
liabili ies
on
he le -hand side
and
asse s
on
he igh was
no emo ed he eby.
O
cou se, in he Uni ed S a es
o
Ame ica, asse s
and
liabili ies a e shown
on
wha one migh
e m he 'co ec ' sides
o
he balance shee .
MANUFACTURING
COMPANY
LIMITED
BALANCE
SHEET
AS
AT
31
MARCH
19Xl
No e
19xl
19x0
R
CAP IT
AL
EMPLOYED
Rxxx
Rxxx
EMPLOYMENT
OF
CAP
IT
AL
Fixed
asse s 5
xxxx xxxx
In es men
in
Subsidia ies 6
xxxx xxxx
O he In es men s 7
xxxx xxxx
Loan
Le y
xxxx xxxx
Loans
xxxx
xxxx
xxxx
xxxx
CURRENT
ASSETS
S ock 8
xxxx
xxxx
Accoun s Recei able 9
xxxx
xxxx
Amoun owed
by
g oup
companies
10
Funds a call
xxxx xxxx
Bank
balances and
cash
xxxx
xx.xx
xxxx
CURRENT LIABILITIES AND
PROVISIONS
Loans
xxxx xxxx
Accoun s payable
P o isions
11
xxxx xxxx
Amoun s owed o g oup
companies
10
xxxx
xxxx
Bank
o e d a s
xxxx xxxx
Di idends ecommended 20
xxxx xxxx
xxxx xxxx
NET
CURRENT ASSETS
xxxx xxxx
DEFERRED EXPENDITURE
12
xxxx
xx.xx
Rxxx Rxxx
Figu e
1
Specimen
balance
shee
issued
by
he
Na ional
Council
o Cha e ed Accoun an s
(S.A.)
du ing
Ap il
1977.
43
In oduc ion o he e ical
balance
shee
in
Sou h
A ica
In a guideline
on
annual inancial s a emen s issued by he
Na ional Council
o
Cha e ed Accoun an s (S.A.) du ing
Ap il
1977
a specimen balance shee
in
e ical o m was se
ou . This guideline eplaced he p e ious guidelines, issued
Feb ua y
1975,
and s a emen s Cl and C2
in
he ea lie se ies
o
echnical s a emen s. These ea lie s a emen s could no be
CONSOLIDATED BALANCE SHEET OF
...
CO., LTD.
O dina y
sha e
capi al
Sha e
p emium
No es
Non-dis ibu able
ese es
2
Dis ibu able
ese es
3
ORDINARY
SHARE-
HOLDERS' /INTEREST
PREFERENCE
SHARE
CAPITAL
INTEREST
OF
OUTSIDE
SHAREHOLDERS 4
Long- e m
liabili ies
5
FIXED
ASSETS
Land
and
buildings
6
Plan ,
equipmen
and
ehicles
7
Imp o emen s
o
leased
p emises
8
In es men s
9
Pa en s
and
manu ac u ing
igh s
10
INTEREST
IN
SUBSIDIARIFS
II
INTEREST
IN
ASSOCIATED
COMPANIES
12
LOAN
PORTION
OF
TAXATION
NET
CURRENT
ASSETS
(LIABILITIES)
Cu en
asse s
S ock
13
Accoun s
ecei able
14
Bank
balances
and
cash
Cu en
liabili ies
Accoun s
payable
Cu en po ion
o
long-
e m
liabili ies
Unsecu ed
loans
Bank
o e d a s
Taxa ion
Di idends
payable
1979
R'<XX>
7 202
21
567
18
759
16
822
64 350
13
417
9 895
87
662
30 094
117
756
52 644
35
883
15
303
189
I 260
9
22 987
I 640
40 485
95 906
40 868
51
117
3
921
55
421
33
802
1 933
9
951
3
102
5 347
I
286
117
756
1978
R'<XX>
7 202
21
567
18
383
14
967
62 119
13
517
8 769
84 405
28
688
113
093
53
900
36 083
16
157
396
I 260
4
20 642
I 602
36
949
95 313
42 562
49 372
3 378
58
363
32 468
5 104
13
655
2 395
4 027
714
113
093
Figu e
2
Balance
shee
showing
he
use
o
he
sys em
o
boxes
in
ac ual
p ac ice.

44
aced bu
i
hey did no sugges he e ical o m i can be
assumed ha he e ical o m
o
balance shee was p esen ed
as a guideline a leas no la e
han
Ap il 1977.
The poin
o
no e ega ding he in oduc ion
o
he e ical
o m
o
balance shee
is
ha
i
escued he accoun ing wo ld
om i s dilemma
o
ha ing o a emp explaining he absu di y
o
showing liabili ies
and
asse s
on
he 'w ong' sides
o
he
T-shaped balance shee .
Undesi able ea u es
o
he modem accoun ing way
o
p esen ing igu es
Figu e l
is
a condensed e sion
o
guideline No. 4.001 issued
by he Na ional Council
o
Cha e ed Accoun an s (S.A.)
du ing Ap il
1977
(Na ional Council
o
Cha e ed Accoun -
an s, 1978).
In he abo e o ma he cu en asse s
and
he cu en
liabili ies ha e been lis ed
o
a i e
a
a ne di e ence.
S.-A . Tydsk . Bed y sl.
1985,
l6(I)
Consequen ly when
he
o he
asse s
a
he
op
o
he
balance
shee mus
be
added
o
he ne cu en asse s
and
he
de e ed
expendi u e i em,
one
has
o
do
he cas ing by jumping
he
inse ed
po ion
o
he
igu es.
F om
he a i hme ical
poin
o
iew his sys em
o
in e mi en igu es
is
qui e
ludic ous
and
con using. In ac ual p ac ice he sys em
o
boxes
has
been
in oduced
and
jus
o
add
o
he con usion, he p ac ice
has
been e ol ed whe eby ce ain igu es a e added om
he
bo om
o
he
op
whe eas o he s
a e
added
om he op
o
he
bo om.
An
example
om
ac ual p ac ice illus a es
he
poin (Figu e 2).
The
igu es ela e
o
he inancial s a emen s
o
a e y
p ominen
Sou h
A ican i m
and
a e no
hypo-
he ical.
Fo
ob ious easons he i m's iden i y
is
concealed.
The
eccen ic ea u e
abou
he abo e o ma
is
ha
whe e-
as as ega ds he liabili ies he igu es
a e
added om he
op
o
he
bo om,
an
en i ely di e en pa e n
is
ollowed
when
i ge s
o
he
asse s.
Qui e
con a y
o
all s anda ds o
CONSOLIDATED
BALANCE
SHEET
OF
...
CO.
LTD.
1979 1978
No es
R'OOO R'OOO
O dina y sha e capi al 7
202
7 202
Sha e p emium
21
567
21
567
Non-dis ibu able ese es 2
18
759
18
383
Dis ibu able ese es 3
16
822
14
967
ORDINARY
SHARE HOLDERS' /INTEREST
64
350
62
119
PREFERENCE SHARE CAP
IT
AL
13
417
13
517
INTEREST
OF
OUTSIDE SHARE HOLDERS 4 9
895
8 769
87
662
84
405
LONG-TERM
LIABILITIES 5
30
094
28
688
Rll7
756
RI
13
093
FIXED ASSETS
Land and buildings 6
35
883
36
083
Plan , equipmen and ehicles 7
15
303
16
157
Imp o emen o leased p emises 8
189
396
In es men s 9 I 260 I 260
Pa en s and manu ac u ing igh s
10
9 4
R
52
644 R
53
900
In e es
in
subsidia ies
11
In e es
in
associa ed companies
12
22
987
20
642
Loan po ion
o
axa ion I 640 I
602
NET CURRENT ASSETS
Cu en asse s
42
562
S ock
13
49
372
Accoun s ecei able
14
51
117
49
372
Bank
balances and cash 3
921
3
378
95
906
95
312
Cu en liabili ies
Accoun s payable
33
802
32
468
Cu en po ion
o
long- e m liabili ies 1
933
5
104
Unsecu ed loans 9
951
13
655
Bank o e d a s 3
102
2
395
Taxa ion 5
347
4 027
Di idends payable I
286
714
55
421
58
363
40
485
36
949
Rll7756
RI
13
093
Figu e 3
Balance
shee
showing
he
use
o
columns.
S.
A .
J.
Bus.
Mgm .
1985,
16(1)
sys ema ic a i hme ic,
and
accep able unidi ec ional mo ion,
ce ain igu es a e coun ed upwa ds. This makes o incon-
sis ency and he ac ha his quee sys em has become
o
widesp ead use, none heless nei he adds o i s logic no
explains i s illogic. The way igu es a e cu en ly p esen ed
make balance shee s a da k jungle
o
colla ions
in
which he
no mal eade
is
c uelly shun ed backwa ds and o wa ds -
an uno hodox dusky jungle in which he no only loses his
sense
o
di ec ion
and
ends
o
lose his way, bu
in
which,
he
also
ge s oughly en angled. A e
all,
balance shee s should
be
sel -explana o y and no
be
so complica ed ha hey equi e
o
be
explained a p io i. I should be
ealiz.ed
ha any
documen
o
book
is
ead om he op downwa ds no
ice
e sa. The cu en
'modem'
sys em could ha e been jus i ied
i he e we e no a be e al e na i e sys em
o
p esen a ion.
Recommenda ions
Use
o columns
This whole ques ion
o
p esen ing inancial s a emen s can
be
easily o e come by he a ul applica ion
o
columns.
Wi h igu es ounded
o
he ques ion
o
space p esen s
e y
li le
o
a p oblem.
An al e na i e way
o
p esen ing he igu es in he abo e
example a e shown in Figu e
3.
The sugges ed al e na i e manne
o
p esen a ion does away
wi h he in ole able gimmick
o
boxes.
Gua d agains a p o usion
o
no es
No es a e necessa y indeed bu he p oblem abou hem
is
ha one mus page backwa ds and o wa ds when eading
he inancial s a emen s. The e o e, inasmuch
as
no es can
be
inco po a ed
in
he ac ual igu es
in
he balance shee i sel ,
wi hou causing he s a emen s
o
be cumbe some
i
is
el
ha hey should be so included.
An
undue p oli e a ion
o
no es should be gua ded agains .
Conclusion
The poin s
o
c i icism oiced abo e a e in ended o
be
4S
cons uc i e and no des uc i e.
I
should
be
ealiz.ed
ha
annual inancial s a emen s a e no an end by hemsel es bu
me ely an in o ma ional aid o ool o se e manage ial
pu poses.
'In hei main s uc u e accoun s should
be
s a ed
in
language which equi es only a minimum
o
special
aining o hei
ull
in e p e a ion and hey should
be
easonably in elligible o laymen' (B ay and
Sheasby,
1947).
The accoun ing wo ld would no doub do
well
o heed he
abo e au ho i a i e commen and o e hink hei s uc u ing
o
inancial s a emen s. The accoun ing p o ession
is
he e o
se e and no o dic a e. The e o e, ins ead
o
unnecessa ily
complica ing he
way
o
p esen ing inancial s a emen s,
please
keep
i
simple - he 'KISS' p inciple in managemen . The
p o ession equi es o w es i sel om he unmi iga ed
accoun ing jungle
o
hei own c ea ion. Al e na i ely, mus
one conclude ha accoun an s a e a special species
o
p esc ip i e c ea u es wi h a peculia mind
o
hei own,
immune o co ec i e c i icism and incapable
o
being
con inced o he be e ?
Re e ences
B ay, F.S. & Sheasby, H.B.
1947.
Design
o
Accoun s. 2nd
Edi ion. London: Ox o d Uni e si y P ess.
Go e nmen P in e .
1941.
Companies
Ac
No
46
o
1926.
P e o ia.
Henochsbe g, E.S. & Fai bai n, W .J .G.
1953.
Henochbe g on
he Companies Ac . Du ban: Bu e wo h & Co. (A ica).
Hu chinson, G.A. & Tuns all, F.C.
1926.
P ac ical Bookkeeping
o
Sou h A ican S uden s. 2nd Edi ion. Cape Town:
Me can ile P ess.
Na ional Council
o
Cha e ed Accoun an s.
1978.
S a emen s
o
Gene ally Accep ed Accoun ing
P ac ice.
Johannesbu g.
Schoeman, T.
1973.
Guide o he Companies
Ac
and
Regula ings, Cape Town: Ju a & Co., L d., Sec ion
286
(3),
10-
129.
Wul sohn,
B.
& Ca e , R.N.
1947.
Ad anced Accoun s. 3 d
Edi ion. London: Pi man & Sons, p. I.