Accounting - A Foreign Language

Accounting is the language of money.



It really is a language. And, like other languages, you can become fluent in it. Becoming fluent in accounting will hold about as long as becoming fluent in any other language. Instead of using letters or characters, accounting uses numbers. The confusion starts here - most of us have had exposure to mathematics, so most of us understand the idea of numbers. While this may be legal, most of us are not able to understand accounting as a language.



When a young boy first learns his ABC's, he will be able to assume up a book, flip to any page, and snarl you what every letter on that page is. He knows those letters. He knows them well. He understands what they mean. But, does that mean he understands the book? Of course not! He can't read!



So it goes with accounting. Most of us can seize up a financial statement, and we can point out all the numbers. A woman point to profit and say "explore? This is distinct one-million. This company has made a million dollars." But, those trained in accounting knows that this company may not necessarily have made a million dollars. impartial because she recognized the numbers does not mean you have any concept what is going on in the statements. objective as the young boy had no concept the narrative of the book, the woman had no notion the fable of the statements.



Most people have no plan that accounting is a language as such. It's not their fault - nobody told them so. But, it is. It enables you to do many things. A doctor does not peruse a body and scrutinize unbiased a body - he or she sees a number of systems all working with each other. The doctor can recognize one piece of a system and notice how it effects the other systems connected to it. When a system is not functioning properly, the body becomes ill. honest the same, an accountant does not witness a part of stock or a business as impartial a business. He or she sees it as a collection of systems, too. It is like X-Ray vision into a business. One can bid what parts are working, where the strengths and weaknesses are, and the history of the company. One can really read the myth slow the financial statements. A sterling investor will scrutinize which "stories" are great, and he or she will invest his money in those companies.



Here's a quiz for you - does it construct sense to invest in a company if you cannot read its epic?