Your Business is your only valid Account Structure

20^th century management lays a contrived Chart of Accounts over the business

20^th century management cannot account for the actual business, since the business is not organized or managed. Instead, an arbitrary Chart of Accounts is contrived and laid over the business. The Chart of Accounts is, by definition, an inaccurate representation of the business and often contains distortions introduced by management or accounting to meet their own agenda. The chart of accounts is designed to record accrued and actual cash receipts and disbursements and the arbitrary worth of known assets less the worth of known liabilities.

20^th century accounting does not keep accurate and complete records on the actual business as needed for good management and governance:

• Facility records are not managed as capital of worth the be maintained to provide performance solutions needed to produce business results
• Accounting records only a part of the business cycle from the point that cash is received until cash is spent, but does record from the point that cash is spent until cash is received
• Accounting may include statistical accounting within the chart of accounts, but tends to resist keeping full financial records or non-financial records, so that other business records must be kept by other organizations or individuals or fall through the cracks
• Much capital that incurs expenditures against the actual business is not defined as an asset or is labeled as “intangible assets” producing inaccurate net worth and unknown costs
• Important business data on the value of economic output results from the business, the costs incurred to produce the results, the result value-added, and the worth of capital utilized to produce the value-added is not captured or reported
• Accounting is separate from the business rather than being part or every business decision made, both in making the decision and in recording the decision made
• 20^th century accountants are given a narrow education and indoctrinated to follow proscribed principles, rather than being prepared to understand and record the actual business and provide information solutions needed for actual business management
• Accountants have a conflict between many masters, the dictates of accounting, the dictates of external auditors, or the dictates of management that pays their salary
• Contrived 20^th century accounting principles are valid only because they are “generally-accepted” rather than fundamentally-valid principles that accurately record the actual business
• Accounting does not view it role as maintaining accurate records of the actual business as information capital and providing accurate and timely information from records as solutions for good corporate management and governance

The limitations of accounting and the information provided by accounting for management and governance is one of the serious unsolvable problems of 20^th century management.

21^st Century Management records and manages the actual business

Rule No. 4 of the 10 rules of 21^st Century Management: Keep accurate financial and non-financial records on the full business cycle in operations and development. 21^st century management employs Result-performance Management (R-pM) to organize and manage the utilization of capital in performance solutions to incur expenditures and costs to produce value and income in results. 21^st century management organizes all capital to know the positive capital worth in all tangible and intangible business assets, the negative capital worth in liabilities incurred by the business, and the accurate net worth of the enterprise business.

Accounting must record the actual enterprise business, which is commonly defined as “the activity of providing goods and services“. All business activity is the utilization of human and other capital, which is accounted for as specific performance solutions. Goods and services are the final economic output results produced by the business. Therefore, to record or account for the business, we must record the utilization of capital as performance solutions to produce specific economic output results. Anyone working in the business must utilize their own time, capability, and knowledge, plus other performance solutions provided by the business, to produce specific business results. Therefore, we must record the utilization of capital as specific performance solutions to produce value in specific results, to account for the business and to keep full financial and non-financial records on the business. We then meet all needs for accounting, record keeping, cost accounting, intellectual capital understanding, intellectual property maintenance, plus other recording; and eliminate problems with intangible assets, unknown costs, inaccurate information, unknown enterprise and capital worth, and other unsolvable 20^th century management problems.

One consistently-defined business structure solution is used for accounting and all other 21^st Century Management

To do this, the enterprise is organized as one business structure that is used for all business organization and management. The business structure defines all the economic output results produced by the business, as a result structure. The business structure defines all the capital as specific performance solutions utilized by the business as a performance structure. The business is organized as on integrated business structure, when specific performance solutions are deployed from the performance structure to incur costs and create value by producing specific results in the result structure. Accounting must capture all performance costs incurred, result value created, and result value added greater than the costs of all solutions utilized to produce the result.

All structures laid over the business including the account structure are abolished and replaced by the one integrated business structure. Separate, and often conflicting, management reports against the organization, account, performance management, business process, logistics, costing, and other reporting structures laid over the business are replaced by one set of consistently-defined and accurate financial and non-financial reports on the actual business. The Chart of Accounts for 21^st Century Management is not contrived, but is a professionally-managed business organization solution. Accounts are defined by results produced, performance solutions utilized, and capital created and maintained.

Accounting is a responsibility of facility records capital, which maintains tangible information capital. Facility records capital is responsible for all financial and non-financial record-keeping on the full business scope and cycle and for producing information solutions from records for good management and governance. Professional records management does not keep records against an arbitrary chart of accounts. Professional records management keeps complete and accurate records of the actual business.

Income is the value created in results produced

R-pM records all results produced by the business. Every result has a value that eventually leads to revenue or income. Professional record-keeping records the value of all results produced by the business. Whenever a new result must be produced, such as a new customer service or a special study report, the result is added to the business structure and the performance solutions needed are deployed to produce the result. The value of the result is established by the internal or external customer willingness pay for the result. When the result is completed or no longer needed, the capital utilized is first deployed to produce another result, and the result is deactivated.

If the result is implemented as capital such as the study report, the result value goes into capital worth and the actual costs of producing the report go against the value of management results produced by utilizing the report.

Results include revenue results in result chains that lead to final results that go to the customer, capital results that maintain, improve, or develop capital operationally, and investment results produced to develop or utilize capital as an investment. Revenue results increase the worth of cash, receivable, or financial facility capital. Capital and investment results increase the worth of other capital utilized by the business.

Expenditures are the consumption of capital in the performance solutions utilized

Each performance solution utilized to produce a result incurs a cost. 20^th century accounting concentrates on payroll expenses of human personnel solutions, facility supply capital that provides the cash expenditures, and facility equipment capital that depreciates. Many operational costs are recorded as expenditures when capital is being developed, but the capital is never recorded as a solution of worth and utilization costs are not captured when the capital is utilized to produce results.

21^st Century Management properly records all capital utilized by the business including all business, management, intellectual human, and information capital that are ignored as intangible assets today. Costs are incurred each time capital, organized as specific performance solutions, is used to create value in a specific result. Every cost is recorded against the end-result and higher-level results and against the particular categories and classes of capital for the date and time.

Liability solutions, such as credit, may be utilized to incur a cost to produce a result. These solutions have a negative capital worth that is accrued until the cash solution is utilized to produce a paid liability result.

The total costs to produce a specific result are recorded against result value to provide a positive or negative result value-added that contributes to the profit result. Result value-added provides the singular most important metric for 21^st Century Management.

Assets are the worth of all capital utilized by the business

Some solutions, such as cash, receivable, or financial investment facilities, have a countable and set worth. For other solutions, each performance solution is utilized to produce a result value-added. The worth of the solution is in the capability of the solution to add value to results. The worth of the solution may increase as the solution gains experience or improves as with human capital, business and system processes, management tactics, etc. The worth of the solution may decrease as the solution deteriorates or becomes outdated such as facility equipment, information solutions, management strategies, etc. Solutions must be maintained and improved or replaced to have high worth solutions to produce high-value results.

Solution worth is assessed to understand the capability to produce results of value. Old capital that still performs to add value to results is retained. Capital that detracts from result value provides no payback on the investment in the capital and is worthless and should be replaced. Solution worth is a performance indicator that is continually refined as experience is gained with 21^st Century Management.

Capital worth provides the justification for the costs to keep the solution operational and for increases in costs to reward the performance of human capital. Incurring high toner costs for an ineffective printer solution that produces low-quality printed output results may not be justified by the capital worth. It may be better to replace the performance solution with one of higher-worth that produces higher value-quality results for lower operating performance costs.

The worth of all capital utilized by the business should add up to the worth of the business. The worth of the business is the capability to produce annual result value-added or profits over future years that cover the cost of capital, less investment needed to reach that capability.

Liabilities reduce the worth of capital utilized by the business

Liabilities are performance solutions utilized to produce results, instead of utilizing the “cash generated by the business” performance solution. Liabilities are capital that has negative worth and is reserved to cover future cash costs accrued against a result of value that has already been produced for use in the business. This capital’s negative worth is balanced by the reduction of worth of “cash generated by the business” when the liability-removed result is produced.

21^st Century Management utilizes facility records to record the actual business and to provide solutions for management and governance

The business results to be produced and performance solutions to be developed or utilized is defined by management to maintain the business structure as business organization capital. Facility records capital does not define the business or the data to record. Facility records capital must accurately record the actual business in income from results produced, costs of performance solutions utilized, and the changing worth of the business capital. Facility records capital does not just produce proscribed financial reports, but must produce specific financial and non-financial solutions from business records to be utilized by management to produce management and governance results.

Instead of organizing, managing, and accounting for the actual business, we have been indoctrinated to lay contrived organization, management, and accounting structures over the business and to follow “generally-accepted”, but erroneous, organization, management, and accounting principles. Therefore, this article may be difficult to understand in one reading, since 21^st Century Management involves completely new concepts for actual business management. But 21^st Century Management is natural business management that becomes second nature once the outdated 20^th century organization, management, and accounting structures laid over the business are abolished and forgotten.

It is time to leave the 20^th century behind and make the transition from inaccurate and incomplete 20^th century accounting to professional 21^st century records management.