what accounting is?

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In my opinion accounting is the documentation of a company’s activities. It provides a look into the past, present and future of a company. Because I own a commercial finance corporation, I work with all different kinds of small business owners. It is truly surprising to see the lack of accounting knowledge that many of the business owners do not possess. Many business owners think that because they have an idea that they should be able to raise capital for their business. If they knew more about accounting they would be more prepared to present their opportunity to me. A lot of times I have to take bank statements and prepare an income statement, statement of cash flows, and a balance sheet for them. I often catch mistakes that business owners are making on their financial statements that they prepare themselves. The accounting of a business affects all stakeholders. In the book Financial Accounting Tools for Business Decision Making, I noticed that accounting is not just a business function but also a personal tool. The book states, “Accounting provides internal reports, such as financial comparisons of operating alternatives, projections of income from new sales campaigns, and forecasts of cash needs for the next year” (Kimmel, 2011). This got me thinking about my personal finances and all the “internal users” involved. Having the tools and reports to make decisions reduces arguments and provides a realistic framework for family decisions.

Kimmel, P., Weygandt, J. & Kieso, D. (2011). Financial accounting tools for business decision making. Danvers, MA: John Wiley & Sons,Inc.