Learning Business and Personal Accounting:
How Will Accounting Affect Your Life?
Not too many individuals gave very much thought to accounting and the principles and concepts upon which the accounting professional is responsible for upholding, not until the tremendous impact of the corporate scandals of the 90s. During the aftermath of the tremendous surge in the stock market during the 90s, and the success of the corporate giants, many stockholders and investors were left bereft when the CEOs and CFOs made off with billions, and the little investor was left with nothing. In some cases, this was the retirement nest egg for the individual, and now there was very little left of that nest egg. What does this mean to you?
Thanks to the Sarbanes-Oxley Act, and the implementation of better guidelines for corporate reporting and accountability, hopefully this means that you won't be caught in the same situation as your parents or grandparents. But it also means that you need a better understanding of the pitfalls that can be associated with investing, accounting, and the risk that we sometimes take, even if we aren't aware.
As the problem of social security shortfalls, and the need for better investing and preparation for retirement becomes a much larger issue, the need to understand the elements involved: investing, savings, and compounding of interest becomes a bigger issue. On the surface, investing, saving, and interest do not seem like accounting concepts, but in order to understand how they interrelate and work together, you need some basic accounting knowledge, and if you're going to be a responsible and active investor, you will need more than just basic knowledge.
Past the issues that corporate scandals have brought to the forefront, there are many other reasons to expect accounting to have a direct impact on your day to day life; for instance, if you participate in a 401(k) program when you begin work, you need a basic understanding of the investing process, and this will mean that you need to understand some accounting procedures. Your requirement to complete a federal tax return each year, and in many cases, a state return, will require that you maintain records of expenses and income in order to furnish your accountant with the necessary information in order to complete those forms; your home mortgage, when you decide to purchase your first home, will utilize many of the concepts associated with accounting.
Now, let's see, we've discussed purchasing a home, saving for your retirement, company investing, federal tax liability and the corporate business environment, complete with scandal; but we've still not discussed all the ways in which accounting will touch your life. Suppose you are a business owner. How will accounting impact your life? The entire success of that small business can rest in your basic accounting skills, and the knowledge you have of applying those skills in the business environment. The key to successful operation of a business lies in the knowledge you possess about the particular industry or profession in which your business operates, and good accounting practices. There is not one area, other than your expertise, that will have the impact that accounting will on your business. Your ability to establish profitability levels, pricing, and labor control will rely heavily on accounting knowledge.
As you can see, accounting will affect every aspect of your life, for better or worse.
Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.