Financial Markets Operations Management

CHAPTER 13 Accounting for Securities

13.1 INTRODUCTION

Part IV of the book will take you through two elements of monitoring and control: accounting and reconciliation.

13.1.1 Accounting and Why We Need It

Let me ask you a very simple question: how much are you worth? Make a list of the sort of things that you own and estimate what these are worth. This will be your net worth.

Of course there will be no definitive answer to this question, as every person is unique and every person's net worth will differ. But why do you need to know how much you are worth? Perhaps the most obvious answer would be that you are interested in knowing. However, you are not the only person who either needs to know or has to know your worth.

For example, your government has an interest as your salary will be taxed; whilst this income tax is typically deducted at source, the government, through its revenue agency, will be keen to ensure that you have paid sufficient tax.

Another example would include an application to borrow money from your bank; it needs to be assured that you have the ability to service that loan. To do this, it might require documentary evidence of your salary and other assets that you might own. The list goes on!

To summarise the above, there are certain entities that need to know certain information about our wealth.

Q&A

Question

Consider a corporate entity, such as the organisation which employs you. How much is the organisation worth, who needs to know and why?

Answer ...