![]() Date: 2024-08-17 Page is: DBtxt003.php bk009080300 | |||||||||
TrueValueMetrics
ACTION INFORMATION FOR ALL OF SOCIETY Metrics about the State, Progress and Performance of the Economy and Society Metrics about Impact on People, Place, Planet and Profit Chapter 8 - ABOUT DATA 8-3 PERMANENT, TRANSACTION AND SUMMARY DATA | |||||||||
TYPES OF DATA There are several different types of data ... and a good system will work on each type of data in the most appropriate manner. One way to characterize data is into the following:
Permanent data Some data change very slowly, and the update for these data can be infrequent. The methods used for updating may also be low cost and simple without causing inefficiencies. These data are permanent data ... they can be put into the record once, and rarely change.
Though there is a huge amount of data ... surprisingly little is organized to inform about the status and progress of communities. In many cases these data are very slow to change ... life is not much different in many communities than it was years ago ... generations ago ... centuries ago. The first challenge of TVM Value Accountancy is to put some of the permanent data on the record for as many communities as possible. Transaction data Transaction data are many and often require real time response. These data need to be put on the record in a very different manner in order to be of much value. Modern data processing techniques are powerful and are being used in the corporate environment to improve corporate performance. Use of Big Data and efficient OLAP have changed the data foundation inside many corporate organizations and are being used by financial organizations to improve their profit performance in the capital markets. Equivalent techniques have not been developed and deployed for any of the big questions about society and the economy that impact people, place and planet. Statistical techniques can be helpful ... but in many situations the use of accounting methods may be more powerful than statistical methods. In accountancy all transaction data are put into the record ... and only one operation is done on these data, that of putting the data into accumulators ... accounts ... and adding them up. For TVM Value Accountancy, this is problematic, at any rate at an acceptable cost. So how may the information carried by transaction data be handled at an acceptable affordable cost. In money profit accountancy transaction data are recorded in a system that “adds the data” so that there is a useful summary ... for example: the total of a specific types of transaction over a period of time may be accumulated and from this a Profit and Loss Account can be prepared. Because of the double entry characteristic of accountancy, the transactions also add up so that a Balance Sheet may be prepared. In the accountancy construct the change in the balance sheet from the beginning to the end of a period is the same as the profit or loss for the period. Another use of data is to help in the understanding of behavior ... how things change as the situation changes:
The challenge is to put these various elements together so that there is a cost effective understanding of the situation in a community and the way in which the transactions in the community are impacting the community. Summary data One of the ways in which accountancy makes for efficiency is that the summary data are simple to prepare and easy to understand. Simply put, accounting reports are no more complicated for a very large operating entity as for a small one ... a rather small number of accounts are used ... but while the number of transactions recorded in the account may go up ... there is only one total for the period no matter how many transactions. Accounts are nothing more than a collection of transactions processed in a common organized manner and 'added up' ... anything more, and the reports cannot be said to be a true and fair representation of the activities of the organization. Transactions are the source material for preparing summary data and for the preparation of accounts and financial reports. The only operation that accountants want to see done on transaction data is the simple operation of adding ... no statistics ... nothing sophisticated.
Accounting data are a powerful component of modern corporate management information. Similar use of data are needed for the broader economy and society. This is what TVM Valuer Accountancy is all about. ORGANIZING DATA Organizing data in an accounting system ... accounts Data in an accounting system are organizaed into 'accounts'. All transactions of a similar type are put together in an 'account' and from time to time these transactions are 'added up' and used in accounting reports. Double entry and 'balance' The data of an accounting system are especially powerful because they are part of a system that has an inherent coherence. The system is founded on accountancy's double entry principles with every transaction embracing the idea of “debit” and “credit” ... and the main approach to summarization organized around the idea of “balance sheet accounts” and “operating statement” accounts. This enables some very powerful techniques for the management and control of resources, and for routines like 'incomplete records' that may be used to fill in gaps in information that would otherwise stay unresolved. This is more useful than massive statistical manipulation of small datasets without any application of accounting's powerful double entry construct. Debit and credit Every transaction has an accuracy check component ... that is the balancing of the debit amount and the credit amount. The check is, however, more substantive than mere arithmetic ... the amount of resource paid out equals the cost of the item acquired. Another example ... the amount of money received equals the revenue associated with the sale of the item. Operating statement accounts In the example, the revenue is an operating statement account. Where the cost is related to an operating transaction such as the payment of electricity for the factory, this is also an operating statement account. Where the item acquired lasts for any length of time the item is accounted for through the balance sheet accounts ... and recorded in the operating statement accounts as the item is used and its value goes down. Balance sheet accounts Where the cost relates to an item that lasts any length of time, the transactions is accounted for with balance sheet accounts. An item acquired is paid for (cash is disbursed and cash balance goes down) and the item is either put into inventory, a balance sheet account, or is recorded as a fixed asset, another balance sheet account. As these items are consumed, there is a recording in the operating statement accounts ...balance sheet inventory reduces and there is an increase in operating statement cost of sales ... or, in the case of fixed assets, the provision for depreciation increases and the operating statement charge for depreciation goes up. Powerful and critical concept These ideas are not very complicated, but they are very powerful. They facilitate a very simple presentation of reality without getting complicated. The concept scales and facilitates a simple report for very large scale activities. The underlying concept pf balance, however, never should change.
Derived data from the accounting construct A powerful technique that emerges because of the structure of accounting is the use of “incomplete records and standards” to derive data that would otherwise be very difficult or impossible to obtain at a reasonable cost. In business accounting it is possible to prepare a full set of financial statements from incomplete records ... knowledge of the balance sheet accounts makes it possible to deduce some of the key facts about the operating statement, including the most critical fact, the profit for the period. Many elements of the operating statement may be deduced from records that exist, but are not formally included in the (missing) accounts. For example ... data about payroll may be obtained by looking at the payroll record, even where there is no posting to the accounting records ... data about some costs can be obtained by reference to cheques and bank records ... a lot of the blanks can be filled in. But the critical control in incomplete records is that the change in the balance sheet is the same as the operating profit (surplus or deficit). Incomplete records is the key technique that makes it possible for TVM Value Accountancy to be valuable a long time before it is complete ... in fact cost effective Value Accountancy is unlikely to ever come from complete datasets ... but is going to come from derived data. TVM valuadd reporting is likely to be very useful very quickly as rapid analysis is done of data that shows an issue is arising and there is a disconnect between resources deployed and results being achieved. Standards are a way for accountancy to simplify the potentially complex area of costing. In TVM Value Accountancy standards are central to an understanding of cost performance ... but they are also used to help understand impact and the value adding in the community. | |||||||||
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