Friday, December 29, 2006

In photography an increase in saturation can DECREASE contrast

It is mind-boggling, judging from the opinions presented on the internet, the lack of understanding regarding color saturation in photography. Most of the so-called experts seem to be mindlessly reciting mantras they have heard somewhere without understanding the topic. They all self-confidently proclaim that an increase in saturation INCREASES contrast. In reality, when two colors are similar in that in both colors the same element of the RGB (red-green-blue)components dominates, an increase in saturation DECREASES contrast; but when two colors are dissimilar in that in one color one element of the RGB dominates while in the other color another element of the RGB dominates, an increase in saturation INCREASES contrast. This is important because so many photos of persons are wrecked by an excess of contrast between two similar colors such as on a person's face.

In digital photography colors are composed of a mix of R for red, G for green, and B for blue values. I here prove to you that when two colors both feature the R value being dominant, or when two colors both feature the G value being dominant, or when two colors both feature the B value being dominant, an increase in saturation results in a DECREASE, not an INCREASE in contrast between the two colors; and when two colors feature in one color one of the rgb values being dominant and in the other color another of the rgb values being dominant then saturation INCREASES contrast between the two colors.

All except one of the definitions of saturation I found on the internet I found to be incomprehensible; they all sounded as if someone was reciting a mantra he had memorized that he did not understand. The definition I found to be comprehensible was:

"What is saturation, and why it is so important?
The saturation defines the level of pureness or a color. All the colors derives by a mix of the tree primary colors - red, yellow and blue (or Red, Green and Blue in the common RGB color space). The more a color is saturate, the more it is close the one of the primary colors : theoretically, if you raise the saturation to its upper limit the photo would be composed by just red, green and blue."


From my personal experience I have seen how an increase in saturation makes a color in which the R value is dominant more red. From working with HTML I have seen what the photography gurus seem to fail to understand, which is that in shades of gray, the R G and B values are equal. The photography gurus all agree that as saturation is decreased the colors draw closer to being shades of gray as you can see working with saturation on a photo editor.

Thus when there is zero saturation, or shades of gray, that means that in each color, the difference between r and g and b, is zero, ie rgb(192, 192, 192), rgb(127, 127, 127), rgb(67, 67, 67). This means (my personal inference) that as saturation is decreased, the differences in the r and the g and the b in the color decrease as the r g and b values all draw closer to an average of the r and the g and the b values in the color.

As saturation is increased, the difference between the r g or b element that is strongest in the color and the other colors in the rgb trinity is increased, as I can tell from my own personal experience and from the quotation from included above.

Thus, an increase in saturation will DECREASE the contrast between two colors both of which have say the r component amongst r g and b dominating the g and b components; and an increase in saturation will increase the contrast between two colors when one color has say the r component dominating the g and b components, and the other color has say the b component dominating the r and g components.

Take for example two colors found in a man's face. One is rgb(210,131,118); the other is rgb(233,164,135). In both colors the r dominates. The difference between the r's is 23, between the g's is 33, between the b's is 17 for a total differential of 73. If, increasing saturation, you push the r's half way to the maximum 255, and the g's and the b's half way to the minimum of 0, you end up with the first color being 232,65,59 and the second color being 244, 82, 67 so that the difference between the colors has declined from 73 to 37, a decrease in contrast. Check out what these colors look like in even a simple program the internet gurus are too good for such as Microsoft Paint and you can see the decline in contrast with your own eyes.

Again, take for example two numbers 249 and 55; the difference between the two is 194. Push 249 half way to 255 and you get 252, push 55 half way to 255 and you get 155; the difference between the two numbers declines from 194 to only 97.

Yet again, take for example two numbers 150 and 100; the difference between the two is 50. Push 150 half way to 255 and you get 202, push 100 half way to 255 and you get 177; the difference between the two numbers declines from 50 to only 25.

Now take two colors, with one featuring the R or red component dominating the G and B components, and the other featuring the B or blue component dominating the R and G components, say rgb(210,131,118) and rgb(55,85,121). The difference between the r's is 155, between the g's is 46, and between the b's is 3, for a total differential of 204. If you increase saturation pushing the first color's dominating r value half way to 255 and the first color's g and b values half way to zero you change the first color to 232,65,59. If you increase saturation pushing the second color's dominating b or blue value half way to 255 and the second color's r and g values half way to zero, the second color changes to 27,42,188. The overall differential between the two colors becomes 205 in the r's, 23 in the g's, and 129 in the b's for a total of 357, whereas previously the total differential was only 204, and the contrast INCREASES instead of decreases because in this case in one color the R value dominates and in the other color the B value dominates.

I find it significant and incredible that the digital photography world has apparently failed to understand this key point, that increasing saturation decreases contrast between two similar colors while increasing contrast between two dissimilar colors. Many of my photos of humans were unacceptable using a digital camera that a short while ago sold for $600 but now sells for only $100 (I wonder why?)--until I cured the hyper-contrast in the face portrayed, by increasing saturation and then brought the tint back to normal. Using this camera, my photos of a person would make the person look like a different person from photo to photo. Photos of humans can be wrecked by hyper-contrast between two similar colors in a person's face resulting from a lack of saturation, but all you ever hear from the internet photography gurus is that increasing saturation INCREASES contrast.

I confess to being proud that I, an amateur dabbler, have been able to figure out how a lack of saturation can result in hyper-contrast, without any help from anyone, so as to make fools of the photography gurus who proclaim that increasing saturation increases contrast. Too bad the employers are so mindlessly concerned with credentials, experience, and coddling those whom the rude refer to as 'dorks', that they de-emphasize all kinds of important qualities and under-value persons such as myself.

@2006 David Virgil Hobbs

Thursday, December 28, 2006

Two Noteworthy Dreams (about Running a Summer Camp, and Linda S) I had this Week

Some dreams seem to have more psychological or social significance than other dreams. I have had a few dreams recently here are a couple of them that seem to have special psychological/social siginificance.

In the first dream I was running this summer camp. I felt happy and energetic in a child-like way from the time I woke up to the time I went to sleep, sort of the opposite of the way I have often felt lately. The way I felt reminded me of the way Linda S and Sara Underwood the TV announcer sometimes seem to be.

We at this summer camp had programs for people from little children on up to adults. We traveled around to different summer camps, and did things like find the best music program at a summer camp and transplant it to our super-summer-camp.

At our summer camp, there was a program for little children; I saw the little children sitting on the ground, and near them was this thing that looked like the boxes in Hollywood Squares, about four rows one on top of each other with four boxes in each row, and a person in each box. But in this children's version of Hollywood Squares, the people in the boxes were cartoon characters; one of them was Fred Flintstone. Fred Flintstone in this Hollywood Squares box for kids we had at our camp, looked very happy and energetic, he was so happy and energetic that his eyes were crossed--and the kids he was entertaining seemed to feel similarly to the way he did.

As we traveled around visiting different summer camps putting together our super-summer-camp, I traveled by lying on the roof of a Honda Element car, on my stomach, head forward, as the car moved at high speed. My Honda Element is orange but this one whose roof I rode on was I think blue. I saw myself lying on the roof of a fast moving Honda Element that was traveling on Beaver Street,the road that passes in front of Bentley college.

In the second dream of special significance, I was sitting with Linda S who went to my high school at a table. The chairs were little brown chairs and the tables were low round and brown. Next to the chairs and tables were these shallow pools of water, I think some kind of show was going on in the shallow pools of water.

Linda looked pretty as she did last time I saw her in real life but she looked different compared to how she looked last time I saw her. Her hair was black not brown, she wore it in a pony tail, she had lipstick on which she does not usually wear. Her face looked more typical than in real life, she looked pretty but not as strikingly pretty as when I saw her last, her face reminded me of the face of a doll or a toy, and she was moderately busty as opposed to sort of flat as she seems to be in real life. I think she was wearing a black long sleeved shirt made out of a thickish softish material. She looked a little shorter than she did last time I saw her. But her personality, her mind, her movements were the same as in real life when I had been around her, and I had the same affectionate respectful feelings for her as I often did in real life.

Linda for some reason (in my poems I call Jesus Yayzoos as it was first written in the Greek scriptures) considered me to be of the Greek Orthodox branch of Christianity, as she sat there she told me she liked this Greek Orthodox branch of Christianity she considered me to be part of.

A little book about three inches wide and four inches high that we had with us that had a black cover fell towards the shallow pools next to us. I dove into the pool to catch the book before it fell in the water. I caught it and threw it towards the chairs and the tables, but it flew straight up when I threw it not forward, it was a very light book. I caught it and threw it again and the same thing happened. Again I caught it and threw it and the same thing happened. I do not remember what happened to the little book in the end.

I got out of the water with most of my body naked, somehow the clothes had magically come off me. My skin was brown as if tanned, I started walking somewhere with Linda. I was telling her about how I had noticed how my body was well structured and that with some emphasis on food and weightlifting I would look like a deity.

Linda and I and about four people headed to a train station near where we had been sitting to go to dinner somewhere. Linda and the people we were with went inside the train station doors, but I retreated to a seat outside the train station doors where I had accidentally left behind some notebooks and other stuff. I grabbed the notebooks and the other stuff, put some of the other stuff in pouches in green plastic notebooks, and awkwardly carried the notebooks and the stuff under my arm back towards the train station. Right outside the train station a bunch of the stuff I was trying to carry spilled out on to the ground. There was stuff like egg shaped chocolate in silver wrapping all over the ground in front of the train station doors. A train station supervisor came out, he was white, clean-shaven with black hair, he reminded me of Mr. Gollinger who works for the landlord where I live. He told me that I could pick up all the candy and stuff that had spilled on the ground myself, or pay $75 to the train station. I was trying to figure out what to do, when the dream ended.

Thursday, December 21, 2006

The weak who look strong, the strong who look weak

There is validity to the generalization that men should not be traitors. The treacherous tend towards hyper-cerebralism and lack of natural camaraderie. Traitors have much in common with sinners because most sins are committed against fellow citizens. The ideal man combines national loyalty with internationalism, goodwill to foreigners. One could find pleasures of the mind in national loyalty that are wanting to the disloyal.

But what good are the brainless gullible ignorant flag-waving jingo slinging so called "patriots"? The gullible person is partner to the liar and deceiver. Where does it say, men should be gullible, lest they lose their faith in God?

We have been hearing talk about the importance of slugging it out in Iraq so as to keep the USA from falling into military disrepute and disrespect in the world.

The way I see it there are four combinations: a strong nation that looks strong, a strong nation that looks weak, a weak nation that looks strong, a weak nation that looks weak.

The excess of concern for military reputation, remininds you of teen-age gangsters who are overly concerned with looking tough through fighting. Such excess can lead to weakness within and the veneer of strength without--or even worse, to weakness within and weakness without, the appearance of weakness combined with actual weakness. I for one find internal strength combined with the appearance of weakness, preferable to internal weakness combined with an external semblance of strength.

Nations can experience subtle benefits produced by the national loyalty foreigners have to their own nations--men having a heart for their own nation need not be a bad thing; but it is time for the gullible flag wavers to begin pondering the possibility that due to excess influence of foreign interests, the nation is turning into an incompetent that destroys itself while leaders amongst it shout about how patriotic and nationalist their bumbling nationally self destructive conduct is.

I get uncomfortable when I hear sound bite slinging sloganeers simply assert that their policy is the road to national strength without providing any evidence or argument to back their claims. Their neglect of the question would a trillion dollars spent on their pet project be better than a trillion spent on something else gives cause for alarm.

@2006 David Virgil Hobbs

Monday, December 18, 2006

Excel Math and Database Functions

Nutty Professors Mindlessly enthuse over standard deviation method of measuring variance from mean

Microsoft's Excel spreadsheet (stats tables) program allows you to calculate the standard deviation of values in specified table cells ( ).

The standard deviation method of measuring the average variation from the mean, exaggerates the effect of relatively extreme variations from the mean, compared to the simple taking the average value of variations from the mean without squares and square roots being involved. This because 2 squared plus 3 squared is 13 whereas 5 squared is 25 even though 2 and 3 add up to 5, and etc.

Thus with the standard deviation an arrow is considered as deviating from the center of the target more when it misses by zero feet 2 times, by a foot once, and by two feet twice, compared to missing by 1 foot 5 times.

The simple average of the variations from the mean without squaring and square roots being involved by way of contrast, measures being off by a foot 5 times as the same level of variance as being off by 2 feet twice off by a foot once and hitting the center, being off by zero, 2 times.

So which is the better measure? It all depends on the level of acceptable error. If you are going to be shooting after practice at a real life target that is smaller than a circle with a radius of 1 foot, then you would be realistically speaking more accurate (manifest less variance) if you missed by zero 2 times compared to missing by a foot 5 times, because missing by 1 foot would entail a complete miss.

Thus in such a case, the standard deviation would not be as good a measure of "variance" in hitting your target as the simple unsquared average of the distance from the mean.

The standard deviation would count you as showing more variance if you hit the exact center 2 times missed by a foot once and by 2 feet twice, this despite the fact that in such a case shooting at a target with a radius of less than a foot you would hit it 2 times whereas missing the center by 1 foot 5 times you would completely miss the target 5 times.

Thus I find it unacceptable that the mathematics academics, manifest this knee-jerk reaction that avers that squaring variations from the mean and then taking the square root as in the formula for the standard deviation, is of course superior to the simple unsquared average of variations from the mean, simply because the standard deviation formula exaggerates the effect of relatively larger variations.

@2006 David Virgil Hobbs

Saturday, December 16, 2006

Online web page -> Excel -->Online web page stellar example

The best job of getting Excel tables and graphics into Html and jpeg format presentation on the web that I could find, is at:

The templeate.html table is a combination of two different data sources, the annual cpi and also the annual dollar index, that were imported into Excel from online web pages, and combined in Excel, with a graphic of the combination produced in Excel. This Excel output was then with difficulty with Google spreadsheets playing an important role, turned into the output you see at

In second place, I count This page is the same as the templeate.html, except that Google Spreadsheet's server-side participation in the process of producing the web version of the original Excel table-chart combo has been replaced by the free client-side Nvu HTML editor; and the data for all of the tables is contained in one pagein nvu_exp_excel.html as opposed to the container page featuring 3 iframes each with a page in it, for a total of 4 pages, that is used in the templeate.html.

The templeate.html method using the Google Spreadsheets as a step in the process, has advantage over the method using the Nvu, in that Google Spreadsheets preserves the text and background color and style in the original Excel xls file whereas Nvu does not. But the method involving the Google spreadsheets, involves four web pages where as the Nvu method involves only one.

Wednesday, December 13, 2006

Statistical Web Pages Built Via MS Excel Import/Export

At is a page showing a new take on the performance of the players at the 2006 World Cup.

At is a page showing the CPI and the Dollar Index brought together into one table, from two different text documents online.

Here is a graphic representation of the change in the CPI and the FRB real broad dollar index since 1973. If you click on it a new window with a sharper picture will emerge:

Tuesday, December 12, 2006

Errors in Microsoft's Excel Spreadsheet Program Online Help

The imperfections in the Microsoft Help documentation in the Microsoft Excel Spreadsheet Program, are a minor problem for those who have friends and family to help them learn the program, but for those who do not have friends or family to help them with such, these imperfections in help for the program are a major problem--a major problem that produces for these less fortunate without friends to help them, humiliation, and also under-valuation, low grades on the curve, to add to the burden they have already experienced from getting humiliating error messages while using imperfectly documented Microsoft programs other than Microsoft Excel.

(We all want friends or family to help us learn softwares, at the same time we are all sick of helping friends and family learn softwares)

ERROR MESSAGE: In the jazzy new Excel interface, the help section is reached via a tiny blue button a quarter of an inch or less in diameter, which is on a blue background in the upper right hand corner of the page. I did not even see this button until I had used Excel for hours. Once I saw it it did not seem like it could be the main help button for the whole program. I at first thought the jazzy new interface had done away with a help section. New users of a software should have not a minute of trouble finding the help section.

ERROR MESSAGE: The help pages that you go to using the Excel help section appear in your browser history, they can be viewed in the browser window, saved as htm, put in a favorites folder. In the browser history these help pages are all titled 'Excel Help' but you can add them to a favorites section and retitle them. You can save the help pages appearing in the browser as html pages. Viewing the help pages in the browser you can thankfully use toolbar multicolored word hiliting features to help you digest them. These are significant advantages but Microsoft fails to insure that new Excel users know about this advantage when they first attempt to learn Excel, which is the time at which such advantages are most useful to them.

ERROR MESSAGE It is easy to get lost in the Microsoft Office Online pages, losing contact with pages such as (Exhibit A) (THE PAGE THAT CONTAINS THE LINKS TO THE ONLINE EXCEL 2007 TRAINING COURSES), because of the way the directory links such as 'Home > Help and How-to' at the top of the pages are set up.

I got to the Exhibit A page mentioned in the above paragraph from a link in (Exhibit B) the Excel 2007 Help page at .

At the top of the Exhibit A list of tutorials page, if in the directory links 'Home > Help and How-to > Training' at the top of the page you click training, you get sent to (Exhibit C) the help and how to page for Office Online as a whole not Excel specifically. This Exhibit C page has no link to take you back to Exhibit A the Excel tutorials list page you just came from; it is a page focused on Powerpoint not Excel. The directory links page at the top of the Exhibit A page should take you to back to the Exhibit B Excel Help page, not the Exhibit C Office Online as a whole page.

To experience the madness of being bounced in and out of subject areas by directory links that take you to wrong destinations and do not get you back to where you came from, while navigating a website containing huge numbers of pages such as the Microsoft Office Online website, is a terrible burden for those in the early stages of learning a software. If page X is the page you go to by mistake, and page A is the page you were at first, you could have a bad problem trying to get back to page X, going through lots of similar looking pages crammed with lots of similar looking small print all the pages having similar titles.

ERROR MESSAGE I was cruising through the Excel tutorial that starts at (Exhibit D) with the greatest of ease, when I crashed head on into a concrete wall. See, the tutorial made the brilliant move of instead of working with us students on a sample Excel workbookthat it the tutorial provided, having us students open an Excel workbook we had already created, and then walking us through some manipulations of said workbook. Thus all us students ended up opening different workbooks and some of us had no workbook to open at all. Aii I luckily had on hand was a workbook that I had imported into Excel from Peachtree. When I tried to total up a column in said workbook by putting a formula into a cell, the text and numbers in the formula itself were saved into the cell not the total of the numbers in the column. I was completely lost.

ERROR MESSAGE At this point I was on my own, left up to my own devices to figure out what was wrong and how to fix it.

ERROR MESSAGE I faced the weirdness that there were little triangles in the the upper left hand corners in the cells in a column I had added to the worksheet I had imported from Peachtree that I was working with. I could not figure out what these little triangles meant, or how to make them go away. I should not have to face such confusion so early in the game, being not a fool to be punished by the wrath of God and the fury of his ministers, but rather simply a novice innocent in the sense of merely being totally inexperienced with Excel. Somehow I clicked in the cells with the triangles, when I did this an explanation mark appeared next to them, I clicked on the exclamation mark, it informed me that the cells were formatted as text not numbers, I corrected the problem, and the cell I designated to sum up the cells above it finally succeeded in summing them. But in so doing I experienced frustration and mental emotional and physical fatigue.

ERROR MESSAGE: The exclamation mark mentioned in the above paragraph should not have been a mystery to me at this error filled stage of the game.

@2006 David Virgil Hobbs

Saturday, December 09, 2006

Accounts for Fictional Company Created using Peachtree Premium

There were some steps involved in between getting the output from Peachtree and the getting the output into a web presentable htm format.

Here are some examples of output I produced using Peachtree Premium Trial Download, set to record a fictional company I inputted into the program. The links are accompanied by my comments re what a particular financial report reveals or does not reveal, or confuses or clarifies.

Notes re

The trial balance shows each account's negative or positive balance. The idea is that all the balances should add up to zero if the accounting has been done properly. The trial balance starts off with a negative number in "beginning balance equity" to balance all the positive beginning balances in the various asset accounts. Thus it starts out with everything adding up to zero.The totals in some of the accounts are counted as negative and in other of the accounts they are counted as positive when the totals are added up in the count that should add up to zero. When the number in an account counted positively in the summary is increased, the number in another positively counted account is decreased, or the number in a negatively counted account is increased so that the balance is maintained. A lack of balance is an indicator of a careless error.

Looking at the trial balance you immediately notice how the consulting income sale is unusual, marked negative, and furthermore I have the personal knowledge that I messed up the accounting of the consulting income on purpose for to learn lessons.

The history of the corruption connected with consulting income here, is that the regular checking account lost 6667 through a payment to a strip club. This was supposed to be balanced out in the accounts, by an expense account entry. But the employee was devious. He balanced the expenditure in the accounts with an not an expense account but an income account, the consulting income account. Thus +6667 was listed as the consulting income account value for trial balance computation purposes.

After this, in a properly handled transaction, regular checking took in 25k in fees, reg checking went up +25k in value and for trial balance purposes, this was balanced by a 25k posted increase to consulting income, .where the number in the account is treated as a negative for trial balance purposes, and where therefore the trial balance purpose value went to -25k.

The checking account behaved normally, its balance went down by 6667 for trial balance computation purposes; but since the consulting income account was designated the balancing account, its value for balancing purposes was changed by +6667. The consulting income account is different from the regular checking account in that totals in the consulting income account are subtracted from the balance when the trial balance and other balances are computed.

When there has been a high level of consulting income and the number in the consulting income account is high this high number will be subtracted from the balance for computing the trial balance. The software adjusted the consulting income account essentially to declare that the consulting income account had been recorded as doing the opposite of earning money, which is reasonable seeing that a payment to outside the company not an earning had been attributed to the consulting account.

Basically the consulting account was labeled as being at 6667 below even or zero, but this 6667 below even is counted as 6667 above even for trial balance purposes because that is the way consulting account income is treated for trial balance purposes and other balance purposes. Also later the properly handled 25000 coming in to the checking account increased the checking account by 25000 and also increased the consulting income account by 25000 because a second account besides the regular checking account is connected with transactions going by the balanced dual entry system of accounting.

The 25000 brought the consulting account up from 6667 below even to 18333 above even, the 18333 to be counted negatively for balances such as the trial balance. The consulting account is handled differently than the assets account because it is increased by increasing the credit column not the assets column, because it is calculated via credits minus assets not assets minus credits, and because it is counted negatively as opposed to positively when balances such as the trial balance is computed. Thus when balances such as the trial balance are computed, if the consulting income account is in the red it will register as a positive number for trial balance purposes and when it is in the black it will register as a negative number for trial balance purposes. Equity and liability accounts ae treated like the consulting income account for trial balance and other purposes.

It all makes you wonder whether the supposed advantages of the inconsistent application of terminologies such as credits and debits is a case of pros outweighing cons. 25000 came in to the regular checking account for consulting work done. The asset column in the regular checking account went up 25000 its credit column stayed the same. 25000 was also recorded as coming in to the consulting income account, but for the consulting income account the credit column was increased 25000 while the debit column stayed the same. The after transaction totals were calculated in opposite ways in the regular checking account compared to the consulting income account. For balancing purposes the regular checking account was treated as a positive the consulting income account negative. Few people explain such matters as clearly as I do but things are still intimidatingly complex. The accounts record is that 25000 frome outside the company came in to the company and in to a department of the company; but the two events which are similar and paralell are treated as oppposites handles in methodologically opposite ways. I suspect that at one time this preoccupation with inconsistency in debits and credits served the purpose of limiting fraud and absent minded error; I wonder if times have changed so we should pay less attention to debits and credits.

In the Peachtree software these details regarding info such as what happened between the regular checking account and the consulting income account is found via Tasks-account register--regular checking account. The account register gives details for the cash, savings, and checkings accounts that are not given for the other accounts. The account register accounts give activity by day instead of monthy summaries; they give details such as the two accounts posted to; the part paid or paying, whether the transaction was a payment or a receipt.

The accounts not in the account register are accessed via Lists-Chart of Accounts--click on account in list.

Unfortunately, seems there is in the Peachtree program, no report that can be generated and saved or exported, that gives all the info that is found in an important account such as 'account register -- regular checking account'. The general ledger comes close but it leaves out important info.

@2006 David Virgil Hobbs

Friday, December 08, 2006

Traditional Accounting Compares Apples to Oranges

The way traditional accounting compares the income statement or the similar cash flow for the current year to the balance sheet covering all the years to date cracks me up.

Such reminds me of a football statistician who uses report A, the various ways in which we have scored compared to the various ways they have scored giving the total score us vs them this year (income statement); and also report B showing the all time us vs them score for our legendary ball club's history combined with all the players who have ever played for our team printed in team colors, and all the injuries they have ever suffered on gray background (balance sheet).

Such a setup means: the data for the current year, is different than what I look at for all the years put together--comparison problems--more comparable would be, same stats looked at for this year as for all the years combined.
The traditional data shows 2 different time periods which are not comparable; one is all-time including last year, the other is last year alone. More comparable would be, say, 1980-2005, and 2005-2006.

We want to compare performance A at time 1 to performance A at time 2, because we all know from common sense this is what produces results.

The balance sheet compared to this year's income statement is not especially wise, if what you desire is comparing all time performance to this year's performance.

Rather a balance sheet showing differences between the first year there was a balance sheet, say 1980, and the year 2005 should be created, which shows the total percent change in given assets liabilities and equities from 1980 to 2005 (accounts receivable up 100 percent compared to its 1980 level), and that shows what percentage of the overall change was produced by given assets liabilities and equities (accounts receivable's growth accounted for fifteen percent of the overall 1980-2005 rise in assets).

Another similar balance sheet should be prepared covering the differences in assets liabilities and equities in the two most recent years. The two sheets should be integrated into one one sheet where for example on one row in the table you can find info showing the percentage change in inventory 1980-2005, and also the percentage change from 2005 to 2006.

Likewise similar things could be done using the 1980, 2005, and 2006 income statements.

The traditional accounting reminds me of a legendary college football team harbored in an enormous preppy field house, which likes to compare its honored all-time history over the centuries to its performance this particular year. Yet said the traditional accounting does a mediocre old-fashioned job of statistically presenting the two pictures, one of the all-time performance and the other of this year's performance.

This despite the fact that dozens of good old boys would like nothing better than to put their feet up on the Field House dining hall tables, slosh back a few mugs of ale, and watch videos backed with interesting stats comparing the all-time performance to this year's performance.

@2006 David Virgil Hobbs

What is Hit On and Missed By Traditional Accounting

Traditional accounting's emphasis on balance sheet, income statement, and statement of cash flows, comes down to an emphasis on the diference between: things owned including current cash and future agreements based differences based income & costs/expenses,and things owed.

Without cash on hand a business is in danger of collapse or requiring expensive loans, no matter how much is owed by customers for services rendered or goods sold and no matter how little is owed by the business to others. The big controversy ad focus of interest appears to be whether certain aspects should be accounted on the cash or on the accrual basis.

This traditonal common modern kind of accounting provides artificial incentives based on illusions, that incorrectly encourage business managers to sell off assets that have appreciated and have been valued at cost when purchased and will be valued at the new cost of sale when sold. Because the appreciated asset has been undervalued, its sale will make the company look good by traditional accounting standards. Though the right thing to do might be to hold on to the asset, the temptation is to sell it because the traditional accounting report will make a D grade performance next year look like an A due to the sale of the asset. In real terms the asset may not have appreciated much since it was bought, but the combination of real price if it is sold combined with the exaggeratedly low last historical cost when bought, makes the asset seem as if it has suddenly via the manager's green thumb evinced in selling it, appreciated more than it has. Wise business judgement decrees releasing an asset when it has appreciated to a certain level--the traditional accounting distorts the perception re when this level of appreciation has been reached.

Likewise this kind of accounting creates artificial illusory pressures which could result in the procrastination of the sale of a depreciating asset. A piece of land that was bought 10 years ago for $100k but is now worth only $20K on the market but has in the accounts been valued at cost meaning $100k should perhaps be sold, the loss eaten lest things get worse. But the manager will be tempted to hold on to the depreciating asset, because if he does, things will LOOK $80K better than they will look if he sells the asset.

Traditional accounting being guilty of creating illusion re sale of owned assets, when a thing is bought held on to and then sold by the accounted for company, you can count on it being guilty with regards to the charge of foolishly ignoring the changes in value of things sold by the accounted for company to others that the accounted for company later needs to buy. A company could sell something off, be surprised to watch it gain in value, and then have to buy at a high price that same thing it sold, when it could have saved money if it had never sold the thing in the first place. A wise guy could sell some company property off, then watch it plummet in value to a worth much less than the money obtained from its sale, and smirk about his good business sense. Clever as he may indeed have been the wiseguy's wisdom will not show up in the books.

Nobody bothers with tracing how things that have been sold by the accounted for company have changed in value do they? But they care alot about how things that have been bought have changed in value.

Similarly with liabilities such as loans, for example if a company borrowed a bar of gold 20 years ago, and agreed to return the bar of gold, and has some latitude re when to return it, and the bar of gold has increased or decreased in value, it is possible to imagine how the traditional accounting based mind could make a wrong decision.

It is hard to imagine traditional accounting or the managerial mind as influenced by traditional accounting being reasonable re something like the borrowed bar of gold, still, then again if traditional accounting chose to value the returned bar of gold at what it was worth when first borrowed, at the time when it was returned, and the bar of gold had appreciated or depreciated in value, traditional accounting might tempt some to stray.

I can see how traditional accounting, could pressure managers to get things looking good by the books, by indulging in all kinds of untimely and unnecessary sales and purchases of assets: an appreciated asset that has been valued at $20k historical cost for 20 years is sold for $40k, the $40k is used to replace the asset that was sold; the books show it as a clever chess move when actually time and energy was spent merely selling something and then replacing it with something that is the same thing as the thing sold and worth the same amount.

All this has nothing to do with whether things are looked at through the accrual (income statement) or cash (statement of cash flows) lense.

The manner in which assets and liabilities effect net income, which is at the heart of the combo that is the balance sheet, income statement, and statement of cash flows, also generally has relatively little to do with the accrual or cash approach.

Thus you can count on the traditional accounting based mind failing to fully map the connections between assets and liabilities held historically on the one hand and net income on the other.

@2006 David Virgil Hobbs

Tuesday, December 05, 2006

The Madness of Double-Entry Credit/Debit Accounting

IMHO as of now etc etc,

Double-entry bookkeeping ( ) has two aspects to it, the aspect of more than one entry being made for a given transaction, and the aspect of labeling one entry a credit and another entry a debit, and keeping a chrono record of the credit/debit labeled entries, in which each transaction is generally recorded as two equivalent numbers one a credit number and the other a debit number.

The esteemed considers both aspects to be elemental in the double-entry accounting which he revers, promotes, and declares to be the basis of modern manual and computerized accounting. "Accounting Coach" spends much of his time and energy, and much of his students' time and energy, attempting to explain the intricate details regarding when and how two entries one a so-called quote credit unquote and the other a so called quote debit unquote entry are made for a single transaction.

"Accounting Coach" and agree that for complex organizations double-entry is necessary and common, and they agree that double-entry generally involves recording each transaction chronologically as both a credit and a debit that are the same except for the one being a credit and the other being a debit.

This apeears to indicate the presence of jaw-dropping amazing incompetence in the accounting world, because the compulsion to record a given transaction as both a debit and a credit, is a source of fundamental irrationality and confusion.

Hopefully the real world is not what accounting coach and say it is, a place where accountants compulsively record some but all transactions as both a credit and a debit the two numbers being the same except for one being labeled a credit and the other being labeled a debit. Hopefully the world sees the wisdom of manually or via machine recording a given transactions in more than one account, while it has the wisdom to forget about classifying each recording of info as a debit or a credit. But for now we assume the world is what the esteemed sources and say it is, meaning insane.

Take for example when entries have to be adjusted to account for the fact that $1000 of work has been done but payment has not yet been received and the incident has heretofore been ommitted from the accounting records. In such event, the accounts receivable account in the balance sheet is increased by $1000, and the "service revenues" account is increased in the income statement by $1000. Accounts receivable represents "Money which is owed to a company by a customer for products and services provided on credit". Service Revenues represent "fees earned by a company including work completed whether or not it was billed". One is money owed for work done, the other is money earned for work done, yet an increase in the number representing money "owed" is treated as a "debit", and an increase in the number representing money "earned" is treated as a "credit". THIS MAKES NO SENSE.

Nevertheless vast amounts of time energy and money are expended explaining the arcane art whereby a change of statistic is identified as a credit or a debit and whereby it is known when changes of statistics must satisfy such rules of identification and whereby such changes of statistic satisfy rules re debits balancing credits.

The income statement is a snapshot of the most recent time period, the balance sheet is a cumulative record covering from the beginning on up to including what is covered in the income statement. The difference is merely one of time period covered. Thus to say that the stat covering work done for but not paid in the cumulative record is debited when it is increased, but the stat covering income earned by work but not paid for in the current time period record is credited when it is increased, is conceptually inconsistent.

The internet gurus may declare that double entry accounting is necessarily the accounting used today in complex organizations; but I now believe that the best form of accounting for such organizations would be to forget about what is called double-entry accountng which is basically the labeling of a change of statistic recorded in two places as being a debit in one place and an equivalent credit in another.

@2006 David Virgil Hobbs

Monday, December 04, 2006

Looking at Companies Through the Traditional Principled Accounting Lense

TPA=Traditional 'Principled' Accounting

There are principles, rules adhered to by accountants; conventions, norms, that are supposed to increase the utility of accounting statements ( ). Important basic principles are:


Recorded amounts ignore inflation this is historical cost method; asset amounts are historical cost not current value; potential losses from lawsuits accounted potential gains from lawsuits not accounted; inventory can be written down to below cost but not accounted as at above original cost; stocks traded on stock exchange shown at current value optionally; because the current value amount (of for example a land asset) is less RELIABLE, less VERIFIABLE, and less OBJECTIVE than the original cost, the original cost is used; accountants must choose the method that produces the more pessimistic results when two methods are applicable.


Accounting policies and relevant info must be disclosed; when a change in methodology is introduced making a current report different from past reports reader should be notified; reports should be comparable to reports of other companies using similar methodologies; if the accountant believes the company will not fail he must say so.

Expenses and revenues are reported when sale is made or work is done not when sale is paid for and workers are paid; advertising expenses charged to period when ad is run;

Records use estimates to show business economic interval for short time intervals of down to a month.

It is assumed company will exist long enough that it can defer some expenses to future accounting periods.

Little details can be skipped and results can be rounded off.

Separation of owner personal finances from owner business finances.

Traditional 'Principled' Accounting (TPA) thus is like a lense whose functioning is effected by these principles, a lense through which companies are viewed. This lense in certain ways distorts matters.

Traditional Principled Accounting and Income Statements

The strictures of modern TPA, do not effect the practical utility of the Income statements showing the Net Income, and the Retained Earnings shown on the Balance sheet, except for the simple matter of adding the net income to the retained earnings. Thus the TPA lense does not distort this aspect.

Traditional Principled Accounting as a Lense to View Times Series Balance Sheets

The idea of TPA appears to be that there is something prudent and responsible, about an accounting system that tends to exaggerate the number of companies that are typical, average, balanced companies, by pumping out these balance sheets that portray lots of companies as all being in some kind of balance, with assets equalling liabilities plus stockholders equity.

With the TPA lense, asset values are marked down as depreciating but never marked up as appreciating, the most they can be marked up to is their historical cost. This results when time series balance sheets are analyzed through the TPA lense, in companies that are actually worse than the accounting reports make them seem to be, not being noticed as actually being worse, and even more than this, companies that are actually better than they seem to be looking like average companies.

The idea of the TPA lense seems to be to focus like a laser on certain aspects of a company regarding which there is a relatively high degree of confidence that what is judged about the company is true. Thus the companies that emerge to look especially good when when observed through the TPA lense, are companies regarding which one can have a high degree of confidence that the company is in good shape. The TPA lense however misses details because bad companies look good and good companies look bad, but nevertheless the TPA lense shines the light on companies regarding which one can say with a high degree of confidence that they are healthy companies.

Because the TPAlense tosses out changes in asset values based on events having nothing to do with the performance of the business in question; because it tosses out changes in stockholder equity value that are based on human supposition regarding future performance; because it tends towards the pessimistic take on a company it looks at, the TPA lense focuses like a laser on qualities that with a high degree of certainty reflect excellence in the company. When you see a company whose time series balance sheets as observed through a TPA lense over a period of years show steady improvement, you can be relatively certain that it is a strong company.

Yet even in attempting to do what it attempts to do, the TPA lense, is imperfect. Example: "gain on sale of land", land being sold for more than its historical cost, is included in the equation that produces net income--which is something the TPAlense should not do if it really wants to do what it is made for, well.

Traditional Principled Accounting as Exaggerator of Net Income & Retained Earnings vs Assets/Liabilities Ratio

One of my estimates re how the numbers produced by the TPA lense should be used to measure company performance is as follows: (NI+RE)/(L + A) where NI=Net Income; RE=Retained Earnings; A= non-cash assets; L=liabilities. The bigger the number produced the better the company is doing in the present sense in terms of its ability to turn what assets it has, into income. The bigger the company's liabilities, the lower this number will be. Sound counter-intuitive because the opposites assets and liabilities are treated the same way but there you have it. When this formula is used with numbers produced by the TPA lense, the result will be an exaggeration of the extent to which the company produces income relative to its assets and liabilities, because the TPA lense undervalues assets.

@2006 David Virgil Hobbs

Sunday, December 03, 2006

Deficiencies of Typical Basic Balance Sheet Accounting Methods

According to and the preferred method of keeping accounts involves a balance sheet wherein the accountant has erred if assets are not always equal to the sum of liabilities plus shareholders equity. Their holy cow of accounting is, that assets equal liabilities plus shareholders equity or the accountant is guilty of sacrilege.

In this post I am referring to the accounting doctrines set forth in these two links above start of this post.

If Shareholder Equity calculated 'At Cost'

Shareholders equity is calculated in the Accounting Coach method, I assume, on an "at cost" basis, meaning that it is valued at what it cost when it was last bought. Thus a problem is that since the measure is blind to changes in stockholders equity produced by changes in expectations for a company, it cannot discern real situations that occur such as imbalance, assets equal 100 in a company, exceeding its 25 liquidity plus 25 real or current value stockholders equity, as 100>50, a situation which can occur because although there are high assets and low liabilities, the future expectation of profit is low.

The Acctg Coach measure as it values stockholders equity at cost, is also blind to situations such as imbalance, Assets=40, stockholders-equity (equity in real or current value)=50, and Liabilities=50, as 40<100, which could occur because although there are low assets and high liabilities, the future expectation of profits is still high.

When the method advocated by the Accounting Coach, is applied with the stockholder's equity valued on an 'at cost' basis, the picture produced by the accounting antennae is befuddled, due to an under-valuation of acts that increase the future expectation of profits.

When shareholder equity is valued at an at cost basis, the picture is again and further befuddled because for example: poorly chosen equipment, could result in high assets combined with low liabilities and low stockholders equity (equity in real or current as opposed to at cost dollars), but this expensive pile of useless equipment situation would not be detected because the stockholders equity is measured in at cost dollars.

If Shareholder Equity Measured not 'At Cost' but in real or current dollars

If such a poorly chosen equipment phenomenon were indeed to be picked up by the Acctg Coach method so to speak antennae through the use of real and current instead of at cost dollars when measuring shareholder equity, the result would be imbalance contradicting the Acctg Coach etc 'basic law of accounts' which it seems accountants would scramble to rectify by weirdly assigning imaginative accounts that put assets where liabilities should be and vice versa, hopelessly complicating the picture, all to make a law, the so called "basic law of accounts" specifying that assets shall equal liabilities plus stockholders equity, all to make this law come true.

Whereas logically, a law of nature should by assumed to be true if events bear the law out to be true, Acctg Coach types it seems reverse matters and force events into making the hypothesized law of nature come true, by weirdly and redundantly categorizing events, as in double-entry triple-entry quadruple-entry accounting started by the idolized Venetian merchants of 500 years ago.

The Accoutning Coach method;s purpose appears to be to separate expectations, bsed on things like cleverness in asset purchases, from actual performance. It does an inmperfect job of this, in part due to for instance the general wage and price inflation enveloping assets it insists on valuing 'at cost', meaning what was paid for the assets when they were last bought.

@2006 David Virgil Hobbs

Saturday, December 02, 2006

Distortions Produced by Asset Valuation of Buildings in Accounting Balance Sheets

Note: I sent this as an email to Accounting Coach on Nov 28, did not load it to the blog till Dev 4, but loaded it as at the Dec 2 date because it covers what "Accounting Coach"'s online book covers first. Usually I try to avoid doing this because it obscures things like psychic insights into events that later occur.

Thanks to "Accounting Coach" for the relatively well-explained story about Joe and Marilyn and the basics of accounting, his first chapter in his online book on accounting.

RE Accounting Basics Part 2 at I have a couple of "clever comments".

His (Accounting Coach's) idea of a balance sheet buildings asset, is, that if the building was bought for $100k 10 years ago, and can be expected to have a salvage value of $0 in 100 years, it should now be valued at $90k, even if it is now worth $500k!

Clever comment: This approach is bound to stumble over factors such as inflation. For example, if a building was bought 20 years ago for $100k, and it is now due to depreciation given a book value of $80k, and its real (real vs current dollars) market value has also declined by 20 percent, if due to 400% inflation (general consumer price index type inflation balanced by income increases) over the 20 years its current market value is now $320K, then reporting in the balance sheet its book value as only $80K, will imply that it has depreciated by 80 percent, whereas its actual depreciation has been only 20 percent!

Clever comment: It all makes you wonder as to why such weird rules of asset valuation for balance sheet purposes are adopted. Such "weird" methods of asset valuation are incomprehensibly weird, and their usefulness for management purposes is limited, until you understand why they are used. Seems such is an attempt to separate the costs and revenues of a business, from the increases in value that luck independent of the performance of the business in question may bestow upon the assets of a business--lucky increases in the value of the assets of a business could obscure low level of performance in the business itself. Nevertheless, seems there must be better ways to distinguish between the performance of a business, and increases in the asset values of a business that are unrelated to the performance of the business.

Useful Relevant Link:,GGLD:2004-43,GGLD:en&q=assets+cost+%22fair+market+value%22+%22depreciation+expense%22+%22market+value%22+%22balance+sheet%22

@2006 David Virgil Hobbs