Accounting Basic Mahathir

Accounting Basic Mahathir

ACCOUNTING

** This article was published in THE EDGE DAILY , May 10, 2021

1. Business people know well that keeping accounts when doing business is essential. It is the only way to know whether you are profitable or losing money.

2. When I was a boy, I was familiar with Malay padi farmers. They were friends of my mother. Off and on I would go to stay with the farmer’s family in Teluk Chengai. I and my brother had to walk on the muddy track, crossing little creeks on bridges of coconut tree trunks.

3. At night we would set short fishing rods along the bunds. Then next morning some of the rods had fresh water fish struggling after having swallowed the bait of little frogs.

4. The family was very poor. They had only about an acre of land to grow paddy. When I asked them how much they made in one year, they were unable to tell me. They clearly did not know how much they made.

5. I did not ask but it became obvious to me that they kept no records of any kind. Certainly, they had no account of their padi business. They seem to think that the whole of their harvest was their profit. They did not know how much effort and money they had put in to get their harvest.

6. I believe that this is the weakness among Malays when they do business of any kind. They keep no record of their costs and the returns they get.

7. Maybe things have changed now. But I suspect that many Malay small businesses keep no record of what they spend and what they make from their business.

8. I would like to suggest that elementary accounting be taught at all levels in the schools. In fact, if we can, even at the kindergarten level.

9. They need not learn anything complex. All they need is to record their expenditure on their business and their incomes. They might also add the value of the labour they themselves contribute. The items which should be included in their record of expenditure must be detailed in the lessons. And of course, the money that they earn in the course of doing business must be recorded.

10. Every month they should record the balance so as to bear in mind how well they are doing. Obviously if the monthly record shows their expenditure is more than their income, they should try to find out why. If the money is diverted to other things unrelated to the business, they should stop the practice.

11. It is well known that new entrepreneurs who had borrowed money often spend a portion of the loan on cars and briefcases. Others spend the money on entertainments and treating friends. Sometimes as much as 50% of the loan is used for non-business affairs.

12. What this means is that the interest that has to be paid for the 50% invested would be doubled. Doing business with 50% of the loan, to make money to pay on 100% of the borrowed would be extremely difficult if not impossible. And so the business fails.

13. Many Malays are from families whose parents are wage earners. The children are given pocket money to spend. How the money is earned is of no concern to the children. The money is always there.

14. This develops in the children a comfortable feeling. Money will always be there. This attitude is not good in adult life when money needs to be earned. And invariably the amount earned is not enough when money is spent without caring about what is earned.

15. With this attitude invariably the amount spent would exceed the amount earned. This is when resort is made to borrowings including from Along. The end is well known.

16. But if a habit of recording the money earned and spent, the person would become aware when he is overspending. Then he would stop or think hard before spending beyond his means.

17. With this, there will be less problem with money and with the likes of Along.

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