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Title: (R)Evolution In Home & Personal Accounting Word Count: 1559 Summary: 'Accounting for a Better Life is a book

in which John Passmore proposes a new, si mplified and fun approach, to home and personal bookkeeping and accounting. The new methods, based on what he calls, domestic well-being accounting, enable people to gain control of their personal and domestic, financial affairs. The sy stem provides the necessary visibility so that users will know exactly what thei r money is being spent on, and how well balanced their spending is, in relation. .. Keywords: home accounting, personal accounting, domestic accounting, debt management, fina ncial control, Article Body: 'Accounting for a Better Life is a book in which John Passmore proposes a new, si mplified and fun approach, to home and personal bookkeeping and accounting. The new methods, based on what he calls, domestic well-being accounting, enable people to gain control of their personal and domestic, financial affairs. The sy stem provides the necessary visibility so that users will know exactly what thei r money is being spent on, and how well balanced their spending is, in relation to its distribution. The balance is across basic domestic needs and responsibilities, discretionary s pending on holidays, leisure and entertainment, and provision for future well-be ing. Knowing about the current and past spending patterns, users can determine w here and by how much, changes might be needed. Budgeting and associated feedback , facilitate the monitoring of such financial planning. The author believes the new methods have the potential to be adopted as a formal , sub-discipline of business accounting, eventually perhaps, with suitable certi ficates and diplomas for those who learn how to use it successfully. With such recognition, the motivation for appropriate investment from industry a nd the state becomes real, so that domestic accounting, its further calibration and an associated training infrastructure, can all be further developed and refi ned. He proposes that in time, such methods should become an established part of the school curriculum. Through this, youngsters will be able to achieve the best pos sible foundation to accept and take on the financial responsibilities that are a ssociated with success, in modern life. In the prevailing UK situation, of a very severe debt crisis, the new approach, almost in passing, provides the required visibility on the state of a family's f inancial affairs, to provide warnings of potential difficulties so that the nece ssary defensive actions can be taken, to prevent falling into the debt trap. For those already experiencing some debt, the new methods provide the necessary vis ibility on their finances to facilitate the required planning and control, requi red to best manage debt recovery.

If people realized the extent and value of the average, domestic, cash turnover, in the course of a lifetime, it seems amazing that serious, financial managemen t is not already, demanded. If an equivalent, small business, with similar turno ver was not effectively managed, the owners would probably have shareholders, ac countants and Company House, knocking on their doors. Accounting has traditionally been thought of as a rather boring, difficult and t edious activity by most people. It is also recognized as somewhat of a challenge , in considering the length of training required to achieve professional status, as a Chartered Accountant, or similar. Having started to manage his own accounts at home, soon after the arrival of the PC, in the late eighties, John Passmore tried to adapt the traditional, busines s-oriented way of using accounts, with all the usual, end-of-period reports. He uses commonly available, general purpose software, an accounting package (Micros oft Money) and a spreadsheet package. He has adapted the maturity of double entr y accounting and has also had to ensure his methods could cope with multiple cur rencies in use, whilst working overseas for thirty years. Although it was basically satisfactory, in so far as it produced the overall fig ures on net worth, John realized two things; first, the traditional business foc us and motivation on profits and shareholders value, understandably, had little r elevance to the domestic situation, and second; there was no visibility on the n ature of the bulk of the day-to-day, domestic income and expenditure. In additio n, the terminology and the overall style of business accounting, he found, not a t all conducive to successfully and easily running accounts, for a home environm ent. Over a decade, John Passmore has gradually evolved a new approach to personal an d domestic accounting. At a fundamental level, he has made everything much easie r to understand and use. This was achieved by a range of simple techniques, such as rigorous naming conventions and a simplified version of the so-called, accou nting equations. More importantly, he introduced a new focus for home and person al accounting, which he calls, domestic well-being. Essentially, domestic well-b eing, or DWB, provides a hierarchical structure for defining and recording, the increases and decreases, making up day-to-day, domestic financial activity. At the top level, there is a 3-way split into Basics, Discretionary and a catchall, of Others. The Basics are sub-divided into Essentials (utilities, food and drink, clothing, health, etc.), Responsibilities (taxes, mortgage, licenses, maintenance, insura nce, etc.) and Family (presents, and personal commitments, etc.). Similarly, Dis cretionary includes asset purchases and sales, Nice to Have (holidays, leisure, entertainment, etc.), Investment for the Future (Home improvements, pension cont ributions and other investments, etc.). Others are for uncontrolled changes, suc h as prizes, inheritance, gains and appreciation, fines, losses and depreciation , etc. This DWB structure is used as the basis for the domestic reports and for categor izing all the transactions, as they entered into the accounts, as part of bookke eping. A sub-title of his book 'Accounting for a Better Life', is 'Gain Control of Pers onal Finances'. Following an overview of control and a comparison of a number of typical control environments, the book describes how control can be applied to financial situations. The visibility now afforded by DWB means that a new set of financial reports can be defined. These replace the business style, Trading Acc ount, Profit & Loss Account, Balance Sheet and Cash Flow Statement. The new set of statements, tailored directly for the domestic situation, include the Domesti

c Well-Being Statement, the Domestic Balance Sheet and the Domestic Cash Flow St atement. Readers will be generally aware of the typical, business ratios such as Gross an d Net profit margins, Return on Capital Employed, and over twenty other ratios. Although vital for management and control in business, these ratios have absolut ely no bearing on domestic finances. However, with the visibility provided by DW B, a whole new group of Domestic Financial Factors suddenly become evident. John has defined five, major new factors and a host of secondary factors. For exampl e, the Basic Cost of Living Factor (BCLF) is the ratio of Basic Domestic Decreas e to Total Household Increases, whilst the Well-Being Contribution Factor (WBCF) is the proportion of Discretionary Domestic Decreases, compared to the Total Ho usehold Increases. These factors provide the yardsticks, by which various charac teristics of domestic life can be both qualified and quantified. These factors open up new areas for comparison, measurement and control of domes tic, financial situations, based on family size. Their real benefit however, has to await calibration and an accumulation of data, so that a parallel can be ach ieved with the business concepts of comparison to industry averages, or norms. T he domestic averages will have to be built-up, over time. In the future, a BCLF 3 of 0.43, for a family of three for example, could be compared with the value o f the factor, found for other families of three, across regions, or internationa lly, across continents. Even without this capability until later, other forms of financial control sudde nly become immediately feasible, in a practical way. For a start, with the new v isibility provided, balancing or redistribution of expenditure across the Basic and Discretionary categories for example, now becomes possible, with due attenti on always being given to Investment for the Future (IFF). John Passmore provides the necessary background and information for anyone to ge t started with setting up and running their own, domestic accounting system. Bec ause of the simplification and visibility provided, which gives relevance to the financial activities of each and every domestic environment, with its own chara cter and content, the author believes he has developed a system which can be fun to use. Once familiar with the set-up, a couple of hours a month is all that is required to keep the bookkeeping under way; and a couple of half-days at the en d of any financial year, to produce the annual reports, should be all that is re quired at that time. With basic computer literacy, access to a computer with preferably, an on-line c onnection, and maths competence, no higher than GCSE level, John believes that b enefits are potentially available for a domestic situation with a shared annual income, of around 20,000 and upwards. It will also be appropriate for accountants in their work on behalf of domestic clients. A sense of personal responsibility towards the members of the domestic situation is paramount. The benefits are that with the accumulation of a few months' worth of figures, a realization of the actual spread and balance of the family outgoings will becom e apparent. With this, decisions can be made on any changes required to the patt ern of financial activity, in order to obtain a better balance. The whole purpos e is to achieve an overall and improved sense of domestic well-being. With the new-found information, family members will know in detail about what ha s to be done in order to achieve a better life-style. Accounting, in itself, wil l not achieve this. Discipline will be required to change spending patterns to o btain the desired changes. The new accounting system can help keep track of prog ress, using budgets and targets. In this way, users will obtain early warnings o

f where and when they are not keeping to target, so that concerted efforts can b e directed at coming back, on track. This authoritative book, written with rigor and thoroughness is being published by Matador, Troubador Publishing Ltd (http://www.troubador.co.uk) and further in formation can be found on the author's web site at http://www.dwba.co.uk copyright 2006 John Passmore

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