A T-Account is a template or format shaped like a “T” that represents a particular general ledger account. Debit entries are recorded on the left side of the “T” and credit entries are recorded on the right side of the “T”. It is a tool for organizing journal entries and analyzing accounting transactions.

Working with T-Accounts

There are a few business owners or managers who have a fantastic ability to remember details, but I would venture to say that most of us find our memory diminishing over time. T-Accounts come in handy when a series of journal entries are required and it becomes too difficult to keep all of them in your head.

When solving accounting problems, you have to think of accounting transactions in terms of the “accounting model”. Click this link if you need to refresh your memory regarding the accounting model:

http://www.reallifeaccounting.com/accounting_model.asp

The “accounting model” is a template you can use to remember how debits and credits work. The two most common scenarios for using T-Accounts are: 1) determining why certain transactions were previously posted to the general ledger; or, 2) working out the most appropriate place to post certain accounting
transactions.

T-Accounts work because they are visually effective. This means they are simple to understand and usually it is possible to portray all the T-Accounts on one page. Let’s look at a basic accounting transaction and then translate it into T-Account form. Assume you sold an accessory to one of your rental inventory assets for $35 cash and deposited the money into the bank. You originally bought the accessory for $20 and put it into inventory until it was sold. The journal entries for the transaction would look like this:

The T-Accounts would look like this:

You can easily see that the debits equal the credits. Let’s look at a more complex accounting transaction. You bought a company van to delivery your rental inventory for $25,000 and you did this by putting $5,000 down and setting up a liability (Notes Payable) for $20,000. You made your first payment of $380, of which $80 was interest, and your first month’s depreciation was $833. To the unfamiliar, these transactions might appear confusing until T-Accounts are used.

A critical step is to make sure that the debits equal the credits. If not, you have made a mistake that must be solved. Next, simply put these T-Accounts in journal entry form:

The reason you are getting so many offers for credit cards today is because the credit card business is so lucrative. The financial institutions don’t seem to mind that consumers are becoming so debt ridden that it threatens our entire economic system. There has been some real concern that if over one million people declare bankruptcy each year during an economic boom, how many more are going to declare when there is a downturn. The fear is that some of these financial institutions may not be able to sustain the losses that could come when ten million people declare bankruptcy. The makings for a huge economic catastrophe could be in the works.

Are we simply victims of these large financial organizations? Or, is it our responsibility to control ourselves? Most of us don’t drink poison knowingly. No, but this is a case of that old jungle disease called the “creeping crud”. We allow ourselves to be seduced by the “easy money” gradually. We fool ourselves into believing that we are going to make more money in the future and then we can afford to pay off the card/s. For many of us, our whole lives are invested in our business. When times are tough, we use the easy money to sustain us. There seems no other choice. Incredibly, some of us are able to acquire numerous cards and rack up $100,000 worth of debt before the institutions stop lending. We pay the minimum payments because that is all we can afford. To our dismay, even as our business succeeds and produces more money, we find that the extra money is going to pay the debts. If we have equity in our homes, we usually refinance and pay off the credit cards. It is temporary relief until the cycle begins again. Eventually, the equity in our home disappears, and we are back, owing a ton on our credit cards. It is a vicious cycle, if there ever was one.

Gain: When the sales price of a fixed asset exceeds the fixed asset’s book value.

Loss: When the sales price of a fixed asset is lower than the fixed asset’s book value.

How would you feel if you sold one of your fixed assets in your business for $2500, deposited that amount in your bank account, recorded it as revenue, paid taxes on the profit, and then, found out you only needed to report $500 not $2500? Kind of foolish maybe? It happens all the time, because people don’t know how to figure the gain or loss from the disposition of their assets.

Knowing how to write the proper adjusting journal entries that will record all the parts of a sale or trade of your fixed assets is a little complicated, especially when it comes to trades, and not possible to explain entirely in this article. The subject matter is thoroughly discussed my Real Life Accounting for Non-Accountants course. However, I can demonstrate some of the mechanics involved so that you will be aware that, when you sell or discard an asset, there is more to consider than meets the eye.

For example, let’s assume that you bought an office desk for $2500 and depreciated it using the Double-Declining method with a one-half year convention. In the U.S. this is called MACRS (pronounced “makers”) or Modified Asset Cost Recovery System. The MACRS system requires a desk to be depreciated over seven years. Three years later, you decide the desk size is too small, so you sell it for $1800. The first step in determining the gain or loss on the sale is to figure out what the book value of the desk is. This is fairly easy to do if you have maintained a depreciation schedule for the desk. Set up a format such as this:

Original Cost Desk: $2,500.00

Depreciation:

Year 1) $357.25

Year 2) $612.25

Year 3) $218.63

Total Depreciation: <$1,183.13>

Book Value of Desk: $1,316.87

Desk Sales Price:_ <$1,800.00>

Gain on the Desk Sale:$483.13

Why is it a gain? Review the above definition. The sale price exceeds the book value. All this may seem like 2+2=4 to the experienced person, but for newbies it may be helpful to review the underlying concepts. In my course, I like to encourage students to think of these accounting events in terms of what actually took place physically. For instance, you bought a desk and used it for three years. You did not deduct the entire desk the first year you bought it. As a matter of fact, you only deducted an expense of $357.25. During the next two years you only deducted $830.88. Therefore, your fixed asset, called a desk, has a remaining cost basis of $1,316.87. Since you sold that asset for more than your cost basis, you incurred a gain. The Internal Revenue Service requires that that gain be reported as income and taxed accordingly.

On the other hand, had the sales price been only $800, then you would have incurred a loss of $516.87. This makes sense, because your cost basis was $1,316.87 and you only received $800.00 when you sold it. Therefore, the money you lost on the sale is a cost of doing business, and according to U.S. tax law, a deductible item.

So be careful when selling an asset. You don’t want to report more income than is necessary, nor do you want to lose the benefit of a deduction. That is, unless you don’t mind paying extra taxes to the government.

This is where your “handy-dandy” General Ledger (GL) account called Miscellaneous Suspense is called into action. No, I didn’t type that wrong. It is not Miscellaneous Expense. The word is “suspense” like “suspended animation”. Miscellaneous Suspense is a holding account where temporary transactions are held until further information is available that will tell you where to record the transactions permanently.

To begin, we need to establish where Miscellaneous Suspense should be located on the Chart of Accounts. The Chart of Accounts is a list of all the GL accounts organized by the five sections: Assets; Liabilities; Equity; Revenue; and Expense. There is no set rule where Miscellaneous Suspense has to be located. However, it definitely does not belong in the Revenue or Expense sections. I think the easiest place to locate it is in the Asset section, under Other Assets.

Here are some examples of how to use the account:

1) Let’s assume that you are cruising along entering checks you have written into the Cash Disbursements Journal in your computer accounting software program. All of a sudden you come to a check for $86.28 that has no GL account number on it and it is written to someone that you have never heard of. The boss is out of town, or, if you are the boss, you can’t remember what that check was written for. You can simply code the check to the Miscellaneous Suspense account until you have time to figure it out. Since all checks written result in a decrease to Cash, which is recorded on the credit (right) side of the ledger, the entry of $86.28 will be recorded on the debit (left) side of the ledger.

Miscellaneous Suspense              Cash-in-Bank   

86.28    |                               | 86.28

A few days later, you discover that the check was written to a new person who comes in every two weeks to water the office plants. Using the General Journal, you write a journal entry to reclassify the Miscellaneous Suspense entry to Outside Services:

Miscellaneous Suspense           Outside Services

86.28     |      86.28           86.28   |

2) Sometimes when you buy machinery or equipment you buy it in stages. You may first put a down payment on the item, and then pay for installation charges when the equipment arrives. You might even buy some accessories that have to be attached to the main equipment. Sometimes you may not know whether certain attachments will fit until you try them. Instead of recording all these different payments to the Machinery & Equipment fixed assets account, you can use the Miscellaneous Suspense account to accumulate all the costs until you have a final figure. This way, when you look into the fixed asset account you can identify this one piece of equipment as costing one single amount. For example:

You bought a milling machine that costs $7,800. The down payment was $ 2,000; installation fees $500; accessories $234; $76; $123; and $42. You returned the $123 item and replaced it with a $161 item. These costs came in over a two-month period, and when the equipment was finalized you set up a Note Payable over three years for the remaining amount. The Miscellaneous Suspense account would look like this:

Miscellaneous Suspense
2,000    |
 500
  234
   76
  123
   42
  161         123
3,136         123
3,013

Using the General Journal, you would then transfer this total amount of $3,013 from Miscellaneous Suspense plus the amount of the Note Payable to the fixed asset GL account called Machinery & Equipment because that is the full cost of the milling machine.

You are probably starting to get the idea now. If you have made a mistake and need to close the books, put the difference in Miscellaneous Suspense until you have time to make the correction. If you find a check has cleared the bank but it’s not on your register and you have no idea what the check was written for, use the Suspense account.

You should clear the Miscellaneous Suspense account by the end of each year; so make sure you write an adequate explanation as to where the numbers came from. This is an accounting technique that keeps your books tidy and easy to understand when, later on, you may be trying to remember what you did.

Keeping track of your finances is one of the most important tasks a business owner has. A lackadaisical approach in this area can spell trouble. For instance, I’ve seen owners who are shocked to find a major discrepancy between the cash receipts and the sales when they are reconciled at the end of the month. They had no idea they were taking that much money out for lunches, etc. In addition, what if you have employees who decide they can dip into the till? There is no way to know who took the cash, the owner or the employee. In accounting, this is an issue known as “Internal Control“. Internal controls are established to maintain the integrity of the accounting system. These are procedures that provide checks and balances to ensure that the figures reported on a financial statement are what they say they are.

In a small business that is large enough to have employees who handle bookkeeping functions such as preparing a bank reconciliation, making bank deposits, and recording entries into the general ledger, an internal control procedure known as the “division of labor“ should be instituted. Division of labor means that the same person preparing the bank reconciliation should not also make the bank deposits. The theory here is that it is less likely that two employees will “collude“ with each other to commit a crime.

The petty cash system is part of a company’s internal control procedures. A set amount, such as $100 is established by withdrawing the cash from the bank and placing it in a separate locked box. When cash is removed from the box, a voucher is filled out for the exact amount of cash and signed by the person removing the cash. This voucher amount and the remaining amount of cash in the box must total $100. When the item is purchased, the receipt is placed in the box in lieu of the voucher. If the box were audited, the auditor would find receipts, vouchers, and cash that equal $100.

You can find locking cash boxes and pads of petty cash voucher slips at your local stationer store. If your business is small enough not to warrant a petty cash box, then you should at least use the voucher slips to replace any money you take out of the cash register till. Follow the same procedures above, and you will always know where your cash went and what it was spent for.

Faced with these hurdles, many small businesses opt for a payroll tax service. This is usually a good idea, as these services tend to be inexpensive and can lift a heavy burden from the shoulders of an owner or manager. However, the information provided by the payroll service company has to be entered into the company’s books. There is a simple way to do this, but first, you must have an understanding of what you are trying to accomplish.

It is imperative to understand the difference between “employee withholding taxes” and “employer payroll taxes”. In the U. S., it works like this:

The state I use in the example is California. The state, in which you live may have different withholdings, so be sure to find out what they are, if any. Either way, you will have to follow the same accounting procedures.

Many of the larger payroll service companies provide a ton of information in the form of payroll reports. Unfortunately, the payroll information you need for your general ledger is often not easily discernable. I have had a payroll service business in Santa Barbara for 20 years, and even I have a hard time deciphering the large payroll service companies’ reports.

The larger payroll companies insist that you pay your payroll taxes “the day” of payroll. Therefore, you must set up an agreement between your bank and the payroll company so that the payroll company can automatically withdraw funds from your account to their account. They pay the taxing agencies directly. Your taxes may not be due on that exact date, so the payroll company has use of your money until the time the taxes are paid. It has been reported that they make millions on the interest alone from the float. (Well, anyway they used to).

If you use a smaller, perhaps local, payroll service company, they may simply process your payroll data and then provide you with the information you need to write your own checks to employees and the federal and state taxing authorities.

The challenge for you is to record the gross wages and withholdings in the proper accounts, and to reconcile what you actually owe for each tax against what has been paid. It’s a bit of pain, but once you get the hang of it, it’s not too difficult. Here’s how I do it:

One of your reports should be a payroll history that lists each employee, his/ her gross wages, FIT, FICA, Medicare, SIT, SDI, and net wages. For instance:

There should be another report that clearly shows the employer payroll taxes.

This is the information you need to write your payroll journal entry. Here is an example of a journal entry for the employee side:

A.

Here is the example for employer payroll taxes:

B.

Look at what you have accomplished with these journal entries. In the first journal entry (A), you recorded your gross wages to the appropriate expense account. You set up the liability for the employee taxes payable. You recorded a credit in the employee advance account, assuming an employee was given a $20.00 advance earlier. You recorded a credit to the Payroll Clearing account for the correct amount of net checks that were paid out. This amount should clear out all the individual checks posted to the Payroll Clearing account that were paid to employees via your cash disbursements system.

For those unfamiliar with a payroll clearing account, it is a general ledger account that is normally set up in the asset section of the balance sheet. The purpose it serves is to reconcile all the net payroll checks paid to employees during an accounting period with a general journal entry that summarizes the total of all the net payroll checks. If an error occurs, the difference will remain in the payroll clearing account. This difference can then be researched to find the cause of the error.

If you write your payroll checks directly out of your cash disbursements system, along with all your other checks, then I recommend using a payroll clearing account. If you use a separate bank account just for payroll, then you probably don’t need a payroll clearing account.

In the second journal entry (B), you recorded all the employer payroll taxes to the expense account and set up the liability for those payroll taxes. When the taxes are actually paid, the amounts will be recorded as a debit to Accrued Employer Payroll Taxes, and the employee FIT, FICA, Medicare, SIT, SDI tax liability accounts, which will zero out those accounts. For instance:

An advantage of using a smaller payroll service company or using your own payroll software program in your business is that you have the use of your money until the taxes become due. This can be critical if you happen to be suffering from a cash flow shortage. In addition, small payroll service companies tend to be more flexible when it comes to reversing mistakes, running a special payroll, researching tax inquiries, handling worker’s compensation audits, etc.

Whether you use an outside payroll service or buy your own payroll software, I would make sure that the reports you receive are simple to read and clearly display the critical information you need to record your payroll activity quickly and accurately. A payroll software program should post all the information automatically. However, you should be able to verify and prove that the information is correct, as mistakes do happen. This requires good reports and a solid understanding of how recording payroll works.

Most non-accountants roll their eyes and shudder when the topic of “depreciation” comes up. This is where the line in the sand is drawn. Depreciation is far too complicated to try and figure out, or so it seems to many. But is it really? Surely the definition of depreciation mentioned above is not that difficult to comprehend. If you look closely you will see that there are five pieces of information you must have in order to determine the amount of depreciation you can deduct in one year. They are:

• The nature of the item purchased (the desk).
• The date the item was placed in service (Jan 1)
• The cost of the item ($1000).
• The useful life of the item (seven years).
• The method of depreciation to be used (straight-line)

The first three are easy to figure out, the second two are also easy but require a little research. How do you figure out the useful life of an item? Let me regress for a moment. There is “book depreciation” which is based on the real useful life of an item, and there is the IRS version of what constitutes the useful life of an item. A business that is concerned with accurately allocating its costs so that it can get a true picture of net profit will use book depreciation on its financial statements.

However, for tax purposes the business is required to use the IRS method. The IRS may have shorter or longer useful lives for fixed assets causing a higher or lower depreciation write-off. The higher the write-off, the less tax a business pays. The long and short of it is that you end up having to create a book financial statement and a tax financial statement. So, most small businesses that aren’t concerned with a precise measurement of their net profit use the IRS method on their books. This means that all you have to do is look in IRS Publication 946 to find the useful life of a particular item.

The last piece of information you need is found by determining the method of depreciation to use. Most often it will be one of two methods: the “straight-line” method or an accelerated method called the “double-declining balance” method. Let’s briefly discuss these two methods:

-Straight-line – This is the simple method mentioned in the definition above. Just take the cost of the item, divide it by the useful life and you’ve got the answer. Yes, you will have to adjust the depreciation for the first year you placed the item in service and for the last year when you removed the item from service. For instance, if your depreciation for one year was $150 and you placed the item in service on April 1 then divide $150 by 12 (months) and multiply $12.50 by 9 (months) to get $112.50. If you removed the item on February 28 then your deduction will only be $25.00 (2 x $12.50).

-Double-declining balance – The idea behind this method is that when an item is purchased new, you will use up more of it in the earlier years of its life, therefore, justifying a higher depreciation deduction in the earlier years. With this method, simply divide the cost of the item by the useful life years as in the straight-line method. Then, multiply that result by 2 (double) in the first year. The second year, take the cost of the item and subtract the accumulated depreciation. Next, divide that result by the useful life and multiply that result by 2, and so on for each remaining year.

But, wait! You don’t have to do this. The IRS provides tables that have the percentages worked out for each year of the two different methods. Not only that, they have set up special first year “conventions” that assume you purchased your depreciable fixed assets on June 30. This is called the one-half year convention. The idea behind this is that you may have bought some items earlier than June 30 and some after that date. So, to make it easy to figure out, they assume the higher and lower depreciation amounts will all average out.

Actually, the IRS doesn’t even call it depreciation anymore. They call it “cost recovery”. Let’s face it. This is a political tool. Congress giveth and taketh away. They have been playing with this system for years. If they want to stimulate growth in business they will shorten the useful life of assets so businesses can attain a higher write-off. If they are not in the mood, they will extend the useful life of an item. A good example is the 39 years set for the useful life of commercial property. This means that if you lease a building for your business and make improvements, those improvements have to be depreciated over 39 years. The House has just approved a bill to drop that down to 15 years for leasehold improvements, but the Senate hasn’t yet approved it.

Before December 31, 1986 we had ACRS or Accelerated Cost Recovery System. Currently, we have MACRS or Modified Accelerated Cost Recovery System. Every time congress tweaks the rules they give it a different name.

Keep in mind there are different schedules for different properties. For instance, residential real property is depreciated over twenty-seven and one-half years and non-residential real property is depreciated over thirty-nine years. In addition, if more than forty percent of your total fixed asset purchases occurred in the last quarter of the year, then, you must use a mid-quarter convention. This convention assumes that your purchases made in the last quarter of the year were made on November 15. This prevents you from buying a big expensive piece of equipment on December 31 and treating it as though it were purchased on June 30 and gaining a larger depreciation expense.

Understanding how basic depreciation works can be valuable to the small business owner because it helps to know the tax implications when planning for capital equipment purchases.

The General Journal (GJ) serves a major purpose. In many small business situations, the Cash Disbursements (CD) Journal is the only journal used in conjunction with the GJ. The CD journal you may recall is essentially your checkbook register. That being the case, one side of the transactions always results in a credit (decrease) to Cash. Your computer system automatically decreases cash and you decide which GL accounts to debit the checks. This is pretty straightforward. If you can’t remember how debits and credits work, type the following link to review the “accounting Model”:

http://www.reallifeaccounting.com/accounting_model.asp

But, how do you enter information into your computer that is not related to the checks you wrote? Consider for instance, items such as: bank charges; correction of mistakes; deposits to the bank; sales; sales tax; non-sufficient funds (NSF) from customer checks that bounce; depreciation expense; gain or losses from the sale or trade of fixed assets; notes payable; inventory adjustments; accounts receivable and accounts payable entries; payroll; and, any other unusual transactions that might occur.

Use of the General Journal sets apart the person who knows how accounting works from those who don’t. Why? Because one must understand how debits and credits work in order to write the adjusting journal entries. This simple knowledge is what gives power to the user. This ability allows a person to solve problems, straighten out messes, bring order to disorder, and not be fooled or intimidated by anyone. I remember one day I was in a client’s office and was getting ready to leave for another client appointment. I mentioned I was working on organizing a corporation’s books that were in chaos, and the principals had no idea what they were doing. I was a little surprised when the client I was with said, “Wow, I would love to have that kind of power”. I had never thought about it that way before, but she was right. There is power with knowledge and it feels good.

The people who “know they know” how accounting works can explain or communicate information confidently to those that need to know, such as the boss, board of directors, partners, CPA or staff. The General Journal is one of the most versatile tools found in the accountant’s toolbox.

What person would attempt to sail across the ocean without a compass, map, and a sextant? These are traditional navigational tools without which one could easily lose one’s way. In accounting, the bank reconciliation serves the same navigational purpose. Here’s why:

Cash is the lifeblood of a business organization. With it you succeed, without it you fail. Cash is so vital to an organization that one must continually keep track of its flow in and out of a business. This flow of cash is analogous to the pulse beat of a human heart. Some businesses check this pulse hourly, some daily. This is usually done via the running check register balance. Deposits are added, checks are subtracted to find the current cash balance.

Because we know that life is not perfect, mistakes are made. In order to find these mistakes, we need to have something from which to compare our calculations. Since we deposit and withdraw our money from a bank we can compare our records to theirs, hence a “bank reconciliation”. Once we have done this we can be reasonably assured that our current check register balance is correct. This is important, because we need accurate information for planning purposes. For instance, can I afford to buy those supplies? Will I have enough money to meet the payroll this week?

Admittedly, some people run their businesses by the “seat of their pants”. I know individuals who call the bank everyday to find out what their cash balance is. However, this method has a fatal flaw called “outstanding checks”. You may have written checks that the bank hasn’t yet received. What happens when those checks hit the bank? You had better have enough deposits to cover them. This is not a good way to run a business.

The bank reconciliation is the heart of your business bookkeeping. It brings light where before there was darkness. It brings order where chaos could potentially reign. Once completed, its power lies in the fact that you now know exactly how much money was deposited in the bank and where that money came from. In addition, there is no guessing as to exactly how much money was withdrawn and for what purpose. It provides a document that you can easily refer to for writing adjusting journal entries. This means you have a clear-cut audit trail that shows where your cash activity originated and how it arrived on the general ledger.

Once you have reached this point in the process of preparing your financial statements you are pointed towards home and the remaining items are usually routine. Those who have tried to prepare financial statements without the bank reconciliation as a guide understand and appreciate what I am talking about.

Financial statements consist of a Balance Sheet and Profit & Loss Statement. These two reports act as a “container” for all your business transactions. Each transaction is recorded according to a set of rules called “The Accounting Model”.

The Accounting Model is made up of three very simple parts:

The first part is a ledger page with a line drawn down the middle (like a big T) automatically creating a left and right side of the dividing line. However, in accounting language the word “debit” is used instead of “left” and the word “credit” is used instead of “right”. The trick here is to not make this anymore complicated than it really is. Don’t try to use the words debit and credit to mean increase or decrease like you see on your bank statement. You can do this later when you fully understand how to work with these terms.

The second part is that there are five of these ledger T’s that relate to the five sections found in a set of financial statements. They are: 1) Assets; 2) Liabilities; 3) Equity; 4) Revenue; 5) Expense. The first three relate to the Balance Sheet and last two relate to the Profit & Loss Statement.

The third part is a rule that states: Any transaction that pertains to a section (Assets, Liabilities, etc.) that results in an increase or decrease has to be recorded on either the left or right side of the ledger page.

Go to the following URL to see an example of the Accounting Model, you can print out a copy if you like:

http://www.reallifeaccounting.com/accounting_model.asp

The next step is to memorize the model so you can visualize where transactions are to be recorded. Have you ever tried to learn how to use a ten-key calculator or computer keyboard? At some time you have to stop looking at the keys and allow your mind to memorize the keyboard. That’s when you get fast and efficient. Memorizing the accounting model is no different.

Let’s try a sample transaction so you can see how this works. A great technique is to think about what actually happened “physically” in a transaction. This is an important step because doing this will tell you what you need to know in order to convert the physical event into an accounting transaction.

For example, let’s say in your business you had a customer who walked in the door, bought some merchandise and handed you a check for $100. You deposited the $100 check in your bank account and recorded the sale in your sales journal. Keep in mind that each transaction has two parts, a debit (left side) and a credit (right side), and that double-entry accounting requires each side of the ledger to equal each other when the transaction is completed.

The first step is to identify the parts of the transaction and determine in which of the five sections each part belongs. For instance, you know that your $100 cash received is an Asset and your sale is Revenue.

The second step is to identify whether the transaction resulted in an increase or decrease to cash and the sale. In the sample transaction, it is obvious that cash was increased and sales were increased.

The third step is to look at the accounting model and let it tell you on which side of the ledger to record the transaction. Try it now. The model tells you that cash, being an Asset, goes on the left (debit) side when increased, and sales, being Revenue, goes on the right (credit) side when increased.

Since the debits equal the credits the books are said to be “in balance”. This gives you a brief idea about how the Accounting Model is used as a cipher to tell you where to record transactions in your general ledger (GL). All you have to do next is to practice using this system so that you become familiar with all of your GL accounts. Then the day will come when you become aware that you are no longer looking at the “keyboard” and realize that the accounting framework is fully integrated into your thinking process.