Creative Accounting - Why it's so not creative anymore

To be creative implies creating something that is unique, something new, something original. Well, creative accounting fails in all those respects unfortunately.

So what is creative accounting exactly? Why is it not such a nice thing? Why does it pop up everytime we discuss financial standards and corporate governance?

Creative accounting, to be put simply is earnings management. Earnings management, is a fancy way of saying 'fudging the numbers'.

About Me

Hi and welcome to my blog. I primarily use it to communicate with my students and disseminate finance and accounting related information, but occasionally I will share my thoughts on other topics like education, economics, politics and society. It is largely an opinion blog and I hope you find it useful for whatever purpose.

Also, if you are a potential employer, feel free to browse through my portfolio. Alternatively, you can click on the Portfolio link at the top of the page.

Samir Harith Portfolio

The Following E-Portfolio is constantly updated. Hardcopies and softcopies are available upon request

On Editing Articles

Today I just finished editing my first journal article. It seems a bit strange, knowing that your input can affect someone's career. Someone you don't even know, don't even care for but yet, part of me wanted to be nice. I wanted to not be too harsh because i know that one day, there will be some anonymous person from around the world, reviewing my article and I would like them to be favourable towards me.

What school do I send my daughter to?

As the years pass, my daughter grows older and I come to that point that all parents must consider: What kind of school do i send my child to?

I want to believe in the public school systems. I really do. I want to believe that the Malaysian education system can provide the right environment for my child to thrive, think critically and develop without being ostracised. I am a product of the public school system but I can't help thinking that I was one of the lucky ones. Lucky enough to have gone to good public schools and lucky enough to have been brought up in a predominantly english speaking urban area where my friends were Malaysians who could claim their first language to be English. Growing up in the Klang Valley exposed me to many opportunities which I feel may not exist in the rural North. Perhaps its the elitist PJ snob in me talking but how well will Northern children accept my english-speaking daughter? Will she be made fun of? Ostracised because she can't speak Malay well? Granted, she will learn the language, but at what cost?

WTF is Equity????? - Part 3

Ok, so we have established that Equity is your investment into YOUR business and it is an important aspect of financing your business.

We have also established that bringing in more Equity means having to share your business with other people. Its kind of like bringing another person in to tell you how to live your life (why would ANYONE want to do that???).

Ok, but what we still have not explored is how Equity works out in the stock market.

First off, let us take a look at your normal business. It starts off as a normal single-owner business and then said single owner finds some partners to expand his business and they grow larger. So lets say the business grows EVEN larger, it needs more sources of finance. Debt is expensive, so said owner gets EVEN more people to contribute money to the business.

WTF is Equity???? - Part 2

Ok, so now we know what the dealie is with Equity, right? For those of you who forgot, you can continue reading, pretending that you DO know, or you can have a quick look here.

Equity is that magical word which basically represents your share of ownership in the business. So, as mentioned in the previous post, if you put in $1000 into your business, that means that you own a $1000 in you business. Right? Of course.

Now, you can continue with this 'arrangement' of being a lonely soul, owning your business all by yourself 100%. But yet, for some strange reason, Business Owners, (Just like Single Men) decide to go out and find a partner, even though they were doing perfectly fine on their own (Just like Single Men). So, lonely business owner seeking partner finds a partner and says, 'Hey, invest in my business and we can share profits equally!'

WTF is Equity??????

Ok, this is a special one for all you accounting students out there. Now, for the more experienced ones, i'm sure you are well aware of what Equity is and how it affects your business, but for a lot of students, especially the new ones and the poor business course students who are forced to take horrible, horrible accounting, the term 'Equity' can be very confusing. So, to start off, lets take a look at the basics:

Every business is made up of three things basically:

1. Assets
2. Liabilities
3. Equity

The Privatisation of Water - A business perspective

The other day I had the opportunity to watch the controversial video of Peter Brabeck-Letmathe, Nestle's current CEO who claimed that water should be privatised and that the stand that some NGOs take to 'claim water as a human right' to be 'extreme'.

No doubt this statement provoked much anger from individuals and NGOs from all around the world and thus Nestle's corporate communication went into recovery mode, clarifying that Mr. Brabeck-Letmathe does indeed believe water is a human right.

No doubt, water is an important resource to all human beings, if it is not the most important resource of all. That being said, while every human being has a right to clean, potable (drinkable) water, clean water is but a scarce resource and like all resources is subject to market fluctuations.

Accounting Students - You don't HAVE to become Accountants

After a year of no updates, (lets just say it has been a very long and eventful year), I have decided to restart this blog, mainly because of the 10k+ hits I have been receiving lately. I suppose with so many people visiting my blog, perhaps it would be best if I started adding more posts.

So, to restart this blog, lets talk about something a bit controversial, that's right! You saw the title, just because you have spent three years of your life learning financial reporting, balancing accounts and memorising IFRSs, does NOT mean you should spend the rest of your life doing so. Heck, I don't even think your first job should even be in an accounting firm!

Almost there!

Dear all, we have come a long way since May and I hope that you all have learned a thing or two about accounting and have gained a greater appreciation for the world of finance.

Exams are next week, so study hard and prepare for it!

Provided you have been paying attention in classes, you should be able to succeed,

and here are the two slides which I didn't upload:

Bad Debts
Balance Sheet

Topics for Revision

Hey there KDU kiddies!

What would y'all like to revise for our coming revision week

Let me know in the comments FAST or else I will teach you WHATEVER I feel like ( WHICH MAY NOT EVEN BE IN THE EXAM!!!, or even accounting-related for that matter.. wahahahahaha!!!)

Cashflow slides and Financial Ratios

It occured to me that maybe, perhaps I have not uploaded this yet:

Cashflow Slides
Financial Ratios

Financial Analysis

Find the relevant slides here

Notes and tutorial for Class 7!

Attached

Notes
Tutorial

Class 6 stuff

Class 6 slides + Tutorial Qs!

Prepaid Credit

Now here is the interesting thing about Prepaid Credit: Its actually your asset, which means its a debit to your personal accounts.

When you make payment for a RM10 prepaid card from Maxis, you are, in essence paying the service provider (e.g. Maxis) money in advance for services (SMS, Talktime, etc..) which you will use later in the month, or week, dependin how much you use it. So by paying them in advance, Maxis actually OWES you RM10 worth of SMS, Talktime and etc... So if anyone owes you anything, that is actually an asset to you.

Why then is it called credit? Its called credit simply because, it is a credit transaction to Maxis. When Maxis owes you services, their liabilities increase (credit!). So the more you use your phone, their liability reduces, the happier they are, because they don't owe you anything anymore!

So prepaid credit is called credit because it is an increase in credit for the service provider (like Maxis) when you buy their prepaid card.

Questions for Tutorial 1 (17/5/12)

Hello my dearies, here are the questions as promised, and slides for yesterday's class

Tutorial 1
Slides for Class 4

Debit Cards and Credit Cards

Ok, in this post, I will explain some traditional notions of debit and credit, i.e. the Debit card, and the Credit card .

the DEBIT card:

First off, the debit card is your asset, and assets as we all know, are GOOD. Why is it an asset? Simply put, it is because the bank owes you money. Whenever you go to a bank, open an account and put money into that account (deposit), you are, in actual fact, loaning your money to the bank for an indefinite amount of time. Therefore when you put money into that account, you increase your assets (DEBIT).

Debits and Credits for different transactions

Ok, first off, there are essentially two categories of transactions, we have your:

1. Balance Sheet Transactions:
Assets - stuff you own, makes money for you (GOOD), etc like buildings, inventory and cash
Liabilities - stuff you owe, gives you money (GOOD) to buy assets but you have to pay it off later (BAD) like bank loans, supplies bought on credit and credit cards
Equity - your own stuff you put into your business, i.e. your investment, this creates a your share in your business. you can share your business with other people in exchange for them putting money into your business but too many shareholders can affect control of the company (UGLY).

and

2. Income Statement Transactions:
Income - Sales, rental income, investment income - basically anything that puts money in your business (which IS NOT from a loan or equity)
Expense - Salaries, Bills, rental expense, cost of materials - basically anything that takes money away from your business

To keep it really simple, just remember the following:

ASSET - increase=DEBIT, decrease = CREDIT
LIABILITY - increase=CREDIT, decrease = DEBIT
EQUITY - increase=CREDIT, decrease = DEBIT

All INCOME is CREDIT
All EXPENSE is DEBIT

For a more detailed explanation, check out the Golden equation and Debit and Credit slides in the previous post.