The first questions asked when introduced to any new topic are often:
- What is it?
- Why do I need to know it?
We will address the second question first: why do I need to know accounting?
Answer: Because it’s fun. Because accounting is fun is likely not the first thing that popped into your mind, but we want to start off with this concept, the idea of thinking of accounting as a kind of game, a sort of puzzle, something we can figure out. Thinking of accounting as a game will make learning accounting much more enjoyable.
Accounting can be defined as “information and measurement system that identifies, records, and communicates relevant information about a company’s business activities” (John J. Wild, 2015).
The process of accounting includes the accumulation of data into a relevant form, which can be used for practical decision making.
Data is often identified using forms and documents such as bills, invoices, and time sheets. Once identified information is input into an accounting system, often an electronic one. The end goal of financial accounting is the creation of financial statements including a balance sheet, income statement, and statement of equity. The financial statements are used to make relevant decisions.
There are many reasons to learn accounting concepts, other than it being fun, although we always want to keep the fun factor in mind. Some of the most obvious reasons for learning accounting include:
- Accounting provides a format to understand business whether we are in the accounting department or not. Accounting is the language of business, a way of communicating business objectives and performance. All areas and departments benefit from understanding accounting because it provides a way to communicate between departments and communication is critical to business success.
- Accounting concepts apply to our personal finances. We all need to deal with our personal finances and learning basic accounting concepts, and recording techniques help ease our mind when dealing with our financial tasks.
Other reasons for learning accounting, which are not so obvious, include that accounting is a great tool to help develop critical thinking skills. Accounting requires reasoning to work through problems, and the practice of accounting will refine reasoning ability and help us approach problems in a more systematic way, a more efficient way.
Accounting can also provide the same sense of satisfaction we receive when completing a puzzle, when mastering a new musical pattern, or when playing a game skillfully. Accounting can provide the same shot of dopamine when we figure out a problem, discern how something works and can claim that the double entry accounting system is in balance.
More accounting resources here.