The postman brought me two copies of an article I have just had published. If you can get to a university or college library or are a member of the Chartered Institute of Management Accountants, take a look at December's issue of Financial Management and on pages 30 - 33 you will see Welcome to Sarajevo: all about some cost accounting work I did in and around Sarajevo in Bosnia-Herzegovina and written by yours truly. DW

One of those "eeesh!" moments arrived today. I read an article in a magazine that included some moving average and seasonality calculations. I was interested in working on the data and set up a spreadsheet to replicate the work I had found. I am pretty sure I found a simple but important mistake in the results in the article so I wrote to the author with all due deference to suggest that there may be a mistake in his article or there may be something I didn't follow but I said I think you might check your work. The author wrote back as follows: All the calculations were carried out using an Excel worksheet. I'm fairly confident they are OK but there may be some rounding errors. Astonishing reply in my opinion. I said to him that there were rounding errors in his work, that was obvious but not important; and I pointed out where there is likely to be an error; but to suggest that because the work had been done on an Excel spreadsheet and therefore he is "fairly confident" that it's all OK was a surprise from one so exalted ... not galvanised into checking it to dispel all doubt! DW

A question just came in relating to my ratio analysis work hosted by Biz/ed. Here's the question and my response follows: From Mark: I believe there's an error on page: http://www.bized.ac.uk/compfact/ratios/ror3.htm where it says: Did you notice that we use the Equity Shareholders' Funds instead of Capital Employed? In fact, they are different names for the same thing! We could call the ratio the Return on Shareholders' Funds (ROSF) just as easily if we wanted; but generations of accountants and students only know it as ROCE. Isn't it true that Capital Employed is shareholders funds plus long-term liabilities, so that ROCE = ROSF only if a firm has no debt, no gearing, and is 100% equity financed? My reply: There is always a worry when one discusses capital employed and for years now I have tended to solve the problem by giving a very general definition of it, such as the one that Mark has pointed out. For A level, 1st year undergraduate and foundation professional accounting work I think the general definition is fine. For higher level work, 2nd year undergraduate and upwards, I would have no hesitation in defining capital employed much more tightly: maybe this is Mark's problem as he seems to be a university student or lecturer. Just to try to prove my point and to reassure Mark and all Biz/ed visitors, I took a look at three definitions of CE from three books that I often use. Here is what I found: 1. A company's capital employed is shown by taking the figure for total assets from the balance sheet. 2. Capital Employed. A measure of the total value of the operating assets of an equity. different measurements are appropriate for different purposes. In some cases, owners’ equity is the appropriate measurement: in an incorporated company, this will be called ‘shareholders’ capital employed’. In some cases, long term borrowings may be added to owners’ equity, while in others dividends payable by the entity and taxation payable by it may be added. 3. Capital employed (in trading) = Share Capital + reserves + all borrowings including obligations under finance leases, bank overdraft + minority interests + provisions – associates and investments. Government Grants are not included. 4. Capital employed (overall) Associates and investments are not deducted, while the overall profit figure includes income from investments and the company’s share of the profits of associated companies, in addition to trading profit. Sources 1 John Ellis and David Williams Corporate Strategy and Financial Analysis Pitman Publishing 2 Derek French Dictionary of Accounting Terms Financial Training 3 and 4 Geoffrey Holmes and Alan Sugden Interpreting Company Reports and Accounts Prentice Hall It wouldn’t be a problem for me to add the above to the page that Mark refers to and I could revise it a bit to make it fit more seamlessly if you wish. Let me know! Otherwise, I hope Mark has found that section to be useful and I am grateful for the opportunity of discussing this issue with both of you. DW

Accountancy student Andrew and I have been corresponding recently: he's just taken a cost accounting exam with the AAT. Anyway, he's had the life confused out of his with the standard costing volume and related variances so I thought it might be useful for everyone to see my reply. Take a look at this page to see what we talked about. DW