One of the ways that the government have in regulating companies is to have a standard way of reporting financial statements. This is typically called as the “Generally Accepted Accounting Principles. ” By developing a Standard Chart of Accounts, the American Booksellers Association is doing the same thing. Which is good for the book industry. With the environment becoming more competitive, there is a need to set a standard and I agree with the reasons stated by the ABA.
Currently, the ABA is publishes the financial results of member companies through its ABACUS. However, different booksellers follow different formats. Thus even with results published, most of the booksellers find it hard to compare their performance with those of others. Another problem is that due to the rather complex way in which financial reports are published in ABACUS, only a few booksellers do so. One solution could be to simplify the format used in the reporting.
While this may work with small companies, a simple reporting would not completely show the performance of large companies. The ABA says that by agreeing on a Standard Chart of Accounts, a balance is made between being to complex or being too simple. By following the same format, booksellers will be able to compare their results with others easily. The ABA does not stop there. While it seeks to have a standard, the ABA also recognizes that the goal of a business is to grow.
Thus the format they have presented allows for the addition of accounts that booksellers need to add. The ABA is correct in saying that by having a standard chart of accounts, a bookseller can not only have a way to compare financial results but also have a good data to be used in making management decisions. Further, the ABA makes the compliance voluntary. This, I believe, is the best reason on why booksellers should support the standard chart of accounts being proposed.