I remember sitting in my freshman level accounting class freshman year, thinking my professor was crazy.  First off, she wore the same black and blue sweater every Tuesday without fail, no matter the weather.  Secondly, she never stopped saying how accounting was like a foreign language, and how we should treat it as such.  This was, of course, absurd.  Right? As far as I understood, accounting was just a way for businesses to keep track of their money.  However, I quickly began to view accounting as a foreign language, and one that I certainly did not understand.  

Like learning a new language, accounting has its own set of words and definitions.  Words you thought you knew have a whole new meaning.  In accounting, a boot is not a type of shoe to keep your feet warm in the winter.  Rather, boot refers to the exchange of nontaxable property.  The learning curve can be steep for understanding these new phrases.  Once you understand the phrases discussed, you must actively set your mind to view a problem through an accounting lens, or you will not succeed.  Once you fully submerge yourself in the language of accounting, however, you come to see its value in all aspects of business.

Accounting is integral for nearly all aspects of business.  Most obviously, accounting helps keep organized books and allows a business to properly manage their money.  With this knowledge, a business can make an educated decision on how to continue their business.  Let’s say you own a cotton candy business.  Looking at your books, you see that while you worked nearly a 50/50 split of weddings and fairs, weddings account for almost 70% of your profits for the last three months.  With this knowledge, you can make the logical decision to book weddings over fairs in the future.  You can also see that your profits have steadily increased in the past two years, and, along with it, your savings.  Looking through the books of the past few years you can decide whether it would be a good business move to open a second location with those savings or dedicate it to updating machines.  Your accounts would also help you determine the best time to open the potential new location.

The most important part of accounting is consistency.  Not only in the times that you do your physical accounting, but also, in the books themselves.  If the March entry lists out “Accounts Payable” and “Accounts Receivable” while the June only has “AP” and “AR” this will lead to confusion.  Books should be detailed enough that the original author does not need to interpret for the current reader.  Additionally, dates should be written in full.  September 19, 2020 is a proper entry.  9/20 is not.  Consistency is key to accurate accounting.

While accounting may seem like a daunting sector of business, it influences so many aspects of business that you are probably more familiar with it than you previously believed.  Accounting is both a result of, and a factor in good business practices.