Modern financial statements too complicated to managers and laymen: A critical survey

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 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen (insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en, gel en abweichend on diesen Nu zungsbedingungen die in de do genann en Lizenz gewäh en Nu zungs ech e. Te ms o use: Documen s in EconS o may be sa ed and copied o you pe sonal and schola ly pu poses. You a e no o copy documen s o public o comme cial pu poses, o exhibi he documen s publicly, o make hem publicly a ailable on he in e ne , o o dis ibu e o o he wise use he documen s in public. I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h ps://c ea i ecommons.o g/licenses/by/4.0/ 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.