A Model for Accounting Control Systems Made by Using a New Idea

 Case:  Finding balance and discrepancy between debit and credit

Assume we have 10 numbers on column of debit and 10 numbers on column of credit.

Question (1) : Which numbers are on columns debit and credit in which the total sum of one or two or three or more them on column of debit equal to total sum of one or two or three or more from numbers on column of credit?

Question (2): The most important concern is to find out the discrepancies. Where are the sources of inequalities? Which areas show us the discrepancies?

Suppose we have two columns credit and debit and 10 numbers on each column as follows:

How many series are there for each column? Definitely, there are 1024 series for each column because total subsets of a power set with 10 members is equal 2^10 = 1024

Which series from column credit are equal to some series in column debit? For example, we have below series for credit column:

x1+ x2+x10+x5

x3+x7+x1

x4 + x3 + x 6 + x 7 + x8 + x9

And below series for debit column:

y2 + y4 + y6 + y8 + y10

y1 + y3 + y5 + y7

y2 + y5 + y9

Is below equation true?

x3+x7+x1 = y2 + y4 + y6 + y8 + y10

Question 2:

If we have discrepancy between total credit and total debit, where is the location of this discrepancy?

For example: If we have:

total credit - total debit = C   

?Which one of above series does show us the location of discrepancy

Is below equation true?

(x4 + x3 + x 6 + x 7 + x8 + x9) – (y1 + y3 + y5 + y7) = C

This model answers to all above questions.

Below figures show you the components of this model:

The components of Inputs are as follows:

1. In left side on cells B3:B12, we fill amount of the credits.

2. In right side on cells C3:C12, we fill amount of the debits.

3. On cells B13 and C13, we have total sum of credits and debits.

4. On cells B14 and B15, we have the difference between credits and debits.

The components of final results for credit as Outputs are as follows:

1. On column A, we have number of answers.

2. On each row between columns B to K which is referred to one of the number of answers and also final results for debit, we have final results of credits as an answer.

3. On column L, we have total sum of each row between columns B to K.

The components of final results for debit as Outputs are as follows:

1. On column M, we have discrepancies which are the differences between total sums each row of columns B to K (column L) and total sums each row of columns O to X (column N).

2. On column N, we have total sum of each row between columns O to X.

3. On each row between columns O to X which is referred to one of the number of answers and also final results for credit, we have final results of debits as an answer.

Below figure shows you the overall picture of this model.

In fact, each row is an answer for above questions in which left side rows are related to credits and right side rows are related to debits. The total sum of each row for credits minus the total sum of each row for debits gives us the discrepancy.

You can also see below clips which are the examples for this model:

Now, let me start an complete sample to control accounting systems as follows:


Introduction

One of the most crucial reasons behind financial crisis in the world during the last decades, could be referred to business scandals and not to adhere business ethics in which it resulted in massive investment losses and numerous employee layoffs. According to KPMG’s report, financial reporting fraud (the international misstatement of financial reports) was the most costly to companies. Despite some efforts such as legislation referred to as the Sarbanes-Oxley Act of 2002 (SOX), we saw another financial crisis in 2008. These results show us the lack of an effective accounting control system in some companies around the world. Of course, big companies like Motorola, IBM, and Nike use complex systems to control and evaluate the actions of managers whereas some small companies still suffer not to have an authentic accounting control system. In this case, there are two types of people who have been involved in accounting jobs. Type one, they are someone who participate in business scandal to earn fraud money while type two are the people who want to be honest and truthful to fulfill their job but they are not able to audit the accounts for solving the problem of account balance by using of available software and finally they are disappointed and urged to present financial reporting fraud.

The purpose of this article is, trying to help the people type two such as CEOs, CFOs, Accountants, Auditors, Treasurers, and Controllers who cannot find out real proof of discrepancy among accounts and they have to fake some bills and invoices to reach the balance of accounts and finally prepare false financial report. For this approach, a case has been analyzed and solved by using a new idea derived from article of “EMFPS: How Can We Get the Power Set of a Set by Using of Excel?” posted on link: http://emfps.blogspot.com/2012/08/emfps-how-can-we-get-power-set-of-set.html

An complete sample to control accounting systems

Suppose we have below accounts on credit and debit columns:

Where can we find the discrepancies?

Important Note: “The balance of accounts in accounting is something like (0, 1) in electrical and control engineering where (0) is true and (1) is false. It means, if the balance of accounts is (0) then it is ok. But if there is even $1 discrepancy between accounts, we should doubt because it is possible there is a big case behind of the accounts. Therefore, please do not say: It is negligible.”

Before going to solve above case, we should make time bench marking for all accounts including inventories and so on.

Time Bench marking

What is time bench marking?

Time bench marking is to determine section and overall time that we are willing to audit and examine the accounts and turn all accounts accompanied by their dates including debit, credit and so on adjusted on this range of time (overall time).

Why do we need it?

It helps us to find out the easiest way to control accounts but we usually reach to two big problems in this way (making time bench marking) as follows:

1.      We often find several payments or earnings in the same exact date, therefore we cannot turn these accounts on overall time to make time bench marking. Let me tell you an example as follows:

We have below accounts accompanied by their dates and we want to control them in the range of time between Oct 1, 2015 and Oct 31, 2015.

We have to sum simultaneous payments and earnings to include between above duration.

How can we do it?

At the first, we use DATA – Remove Duplicates in excel for dates of debit then we copy columns of date and debit on columns A and B in excel and also copy the results of dated inferred by DATA – Remove Duplicates on column C. Next, we copy formula:

=sumif($a$1:b50,c1,$b$1:$b$50) on column D and copy to down as follows:

Using the same way for dates of credit:

1.      Sometimes we have to pay to some contractors advance payment or we cannot receive the bill in the time of payment consequently our accounts will not be closed and we will have the mixed dates for our accounts (please see above excel sheets on column D)

How can we solve this problem to adjust on time benchmarking?

- On column A in excel sheet copy all dates between Oct 1, 2015 and Oct 31, 2015

- Above data of dates and debit copy on columns E and F

- Copy on cell B1formula:

 =IFERROR(INDEX($E:$F,MATCH($A1,$E:$E,0),COLUMN(A1)),"")

- Copy above formula to C1, then copy down both cells

Here is the results:

- Do above steps for dates and credit as follows

:

Now, we can return back to solve the case. 

   Answer to question (1): I applied a new idea derived from article of “EMFPS: How Can We Get the Power Set of a Set by Using of Excel?” posted on link: http://emfps.blogspot.com/2012/08/emfps-how-can-we-get-power-set-of-set.html and solved the case. The results are as follows:

As we can see, there are 19 statuses (rows) where the sum of numbers in each row for debit is equal to the sum of numbers in same row for credit.

Answer to question (2): It is solved by using of new idea mentioned in question (1). The results are as follows:

According to this case, total difference between debit and credit is equal to   -3,595,545,920.

Above tables show us that there are 20 sets of numbers or 20 areas for debit and credit in which we can find the discrepancies.

All researchers and individual people, who are interested in having this model, don’t hesitate to send their request to below addresses:

https://t.me/Allisnumber