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 used by all enterprises today 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 substitute for 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, including accounts, are not managed as capital of worth to be maintained to provide capital 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 or costs 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 taught 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. The business is defined as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. In order to plan, budget, account for, manage, report, or govern the business, all investments in specific capital solutions, all economic economic output results produced, and each capital solution utilized in performance to produce a specific result must be managed. This is possible today with the power of modern information technology.

21^st century management manages the actual business to organize and manage the utilization of capital in capital solutions to incur expenditures and costs in performance 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.

The objective of accounting should be to consistently and accurately record the actual planning and execution of the business

Accounting must record the actual enterprise business, which today is commonly defined as “the activity of providing goods and services“. This is consistent with the more-precise definition above. All business activity is the utilization of human and other capital in performance. Capital is accounted for as specific capital 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 capital solutions to produce specific economic output results. Anyone working in the business must utilize their own time, capability, and knowledge, plus other capital solutions provided by the business, to produce specific business results. Therefore, we must record the utilization of capital as specific capital 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 account for the planned and actual business, the enterprise is organized as one business structure that is used for all business 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 capital solutions utilized by the business as a capital structure. The business is organized as on integrated business structure, when specific capital solutions are deployed from the capital structure and implemented in a performance domain in the performance structure to incur costs and create value by producing specific results in the result structure. The performance domain is defined by the result produced and the capital solution utilized. When a volume of a result is produced business transactions are generated to 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. which should include the account structure, are 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, capital solutions utilized, and capital available and maintained. Business transactions update accounts for the performance domain and totals for the result produced and the capital solution utilized.

The diagram above shows extracts from facility records to show set-results produced across the business with the value of the result, performance costs in total and sub-divided by capital category, and the value-added after performance costs. Financial statements produced today can also be extracted to show accurate financial information.

Accounting should be 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. Professional records management is integral to 21^st century business management, whether it can incorporate accounting or not. The future of accounting is up to the accounting profession and regulators.

Income is the value created in results produced

Business management 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 capital solutions needed are implemented in domains 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 redeployed to produce another result, and the result is either implemented as a capital solution or discontinued and closed.

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 capital solutions utilized

Each capital 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 specific capital solutions decline in worth, when 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 business management. Result value added is attributed back to the solutions utilized to add to performance costs absorbed to date to provide the return of the solution investment to date.

Assets are the worth of all capital utilized by the business

Some solutions, such as cash, receivables, payables, or cash investment facilities, have a countable and set worth. For other solutions, each capital 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.

Future expected result value-added in utilization and disposal and the remaining unamortized balance to be absorbed over the remaining life of the solution infers the current capital worth of the solution. Solution worth is assessed to understand the capability to produce results of value to absorb performance costs and provide value-added. Old fully-amortized capital that still performs to add value to results is retained. Capital that produces negative result value-added provides little payback on the investment in the capital and is low worth. Either the result should be closed or the high-cost solutions should be replaced. Capital solution worth is a capital measure that is continually refined as experience is gained with 21^st century business 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 capital solution with one of higher-worth that produces higher value-quality results for lower operating or solution improvement performance costs.

If a result, such as the study report, is implemented as a capital solution, the result value goes into capital worth and the actual costs of producing the report set up the unamortized investment balance. As the worth of the report declines as the information becomes outdated over the useful life, performance costs are charged against the value of management results produced by utilizing the report, reducing the unamortized balance.The solution worth should always exceed the unamortize balance and the unamortized balance should be zero when the report is closed as a solution, else additional costs are incurred to reduce the balance to the solution worth or zero.

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 payback years that provide the cost of capital or other return needed.

Liabilities reduce the worth of capital utilized by the business

Liabilities are capital solutions utilized to produce results, that utilize credit or otherwise delay utilizing the “cash available” capital 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 available” solution, when the cash is utilized to produce the liability-removed result. The paid liability solution has zero worth and is closed.

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 capital solutions to be developed or utilized is defined by management to maintain the business structure as business organization capital. Facility records capital professionals do not define the business or the data to record. Facility records capital professionals must accurately record the actual business in income from results produced, expenditures and costs of capital 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 facility records on the status of the business against plans 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 business management involves completely new concepts for actual business management. But 21^st century business 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.

Result-performance Management (R-pM) provides the method to organize the business and utilize human and other capital, where needed to produce results

The source of knowledge for corporations to organize and manage their business is Result-performance Management (R-pM). R-pM shows how to organize results to be produced and then how to deploy and implement capital solutions where needed to produce results. Once the business is organized the business can be managed directly, without the need to lay enterprise organization and management structures over the business.

Forward-looking enterprises are now using R-pM guidance to organize and manage their business to gain breakthrough advantages over competitors burdened by unsolvable 20^th century management problems. Business management is explained and documented in the Business Management Toolkit. The Toolkit provides procedures for actual business management and maintains emerging 21^st century management conventions, definitions, and standards. Management consultants who base 21^st century business management services on R-pM knowledge are licensed to help enterprises learn, organize, and manage the actual business. R-pM and business management are supported at result-performance-management.com.

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