“Accounting is part of the vocabulary of business, and if you don’t understand it on a concept level, the world will be a confusing place.” – Scott Adams
Scott goes on to say, “In particular it’s helpful to be able to create your own cash-flow projection on a spreadsheet and feel some confidence that you understand the tax impacts and the so-called time value of money. Accounting overlaps with the fields of economics and business, and in each of those fields you need an understanding of accounting practices.” Read more from Scott Adams in his book “How to Fail at Almost Everything and Still Win Big.“
No less than Warren Buffett agrees with the importance of accounting knowledge. Buffett’s daughter-in-law, Mary Buffett, recounts a story in her book, “The Tao of Warren Buffett” which highlights accounting’s relevance to good investing. She states, “When Warren was asked by the daughter of one of his business associates what courses she should study in college, he replied, ‘Accounting – it is the language of business.’ To read a company’s financial statement you need to know how to read the numbers. To do that you need to learn accounting. If you can’t read the scorecard, you can’t keep score, which means that you can’t tell the winners from the losers.”
Whether you are an employee, running a business, investing, or running your own household, understanding basic accounting is indispensable. Understanding cash flow, budgeting, debt impacts, and basic tax concepts will serve you well. These accounting principles will also make you a more informed member of society, give you a better understanding of the world around you, and improve your financial decision-making.
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