Chapter 16 - Gun-Ho Goo Started Studying Accounting (2)
Looking at the reflection of the fishing rod on the water surface, Chairman Lee said, “Balance sheet was created by slaves during the Roman Empire.”
“Is that right?”
“The warriors going to the Crusades needed someone who could take care of their significant number of trophies at home. In other words, they needed someone who could manage their properties. So they picked a smart slave to do the job.”
“Oh, I see.”
“The warriors had to go to war every now and then. Once they returned home after the war had ended, their properties had either grown or reduced. If they saw more properties, they were good, but if they saw less of them, what would have happened?”
“They would have scolded the slave.”
“No. Slaves were not treated as human beings. The warrior actually cut the slave’s throat with his sword, accusing him of mismanaging their properties.”
“But his throat…”
“That was why the slaves came up with the balance sheet, so they would not get killed. The slave grappled to find how he could lay out all activities related to the properties in a sheet so his master could know at a glance what had actually happened to the properties. He recorded debits and credits in a separate column in the same sheet, so it was easy to understand the current state of the properties and relevant activities. By doing this, the slave could save his life. ”
“I see…”
“The terminology, Chabyun (debit) and Daebyun (credit) have been made by Japanese. They just meant one is recorded on the left side and the other is on the right side; that way you can understand easily. Because they are recorded on both sides: left and right, we call it double-entry bookkeeping.”
“That is the double entry bookkeeping.”
Chairman Lee retrieved the fishing rod, attached bait to the hook, and then cast the fishing rod into the water.
“We had a double-entry bookkeeping in Korea.”
“Really? In our country?”
“That’s right. Our Gaesung City merchants used the same system.”
“Yes, probably so.”
“Here, 35,000,000 is the capital. The debt is 25,000,000.”
“Right.”
“The investment cost for the store is 60,000,000 won; this 60,000,000 won is the assets I can control and manage. Namely, the investment cost plus the debt becomes my assets.”
“So far I think I understand.”
“Then if the debts increase, do the assets increase or decrease?”
“The assets increase.”
“In other words, as the debts increase, the assets increase as well; if the debts decrease then the assets decrease. If you approach the accounting this way, you will understand it easily.”
“Yes… It seems so.”
“Ask your friends whether the increase of debt is the decrease of assets or increase of assets. Surprisingly, many people don’t know.”
“I see…”
“One more thing. You know the difference between the ordinary income and the net income, don’t you?”
“That…”
“Ask the team leader or manager at your factory about the difference between the ordinary income and the net income. Most people don’t know. Keep up the good work.”
“Thank you, Sir. We will go to the other side of the lake for fishing.”
Chairman Lee said one more thing for the last time before Gun-Ho left, “You don’t have to look at the details in studying accounting. Don’t look at the trees; look at the forest. You just need to know the big picture.”
Gun-Ho and Jong-Suk came to the other side of the reservoir and cast the lure fishing rods into the water. Reeling up his slack-line, Jong-Suk asked, “Bro, what is ordinary income, and what is net income?”
“I recently learned those from the vocational school. Ordinary income is a company’s profit after deducting interest cost and interest income from operating income.
“What about net income?”
“Net income is a company’s earnings remaining after factoring in taxes.”
“You know a lot. I don’t know about the stuff, but you sound different now.”
“What are you talking about? I am just Gun-Ho Goo.”
“No, I smell a bookkeeper from you.”
“Silly. What smell? I didn’t even finish the training. I don’t even have the level-2 computerized accounting certificate yet.”
“No, I can smell it. You will pass the exam in no time.”
“What if I do? Let’s say I get the certificate, then what? Companies hire female bookkeepers. I won’t have a chance to get a position.”
“Who knows? Maybe Chairman Lee from across the lake will find something for you.”
“You say that again! I actually saw a job opening for a male bookkeeper from the classified section in a newspaper…”
“Really? Apply for the position.”
“Man! I don’t have the certificate yet.”
“Oh, that’s right. Let’s keep fishing!”