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What is the function of Accounting?

October 8th, 2009 Leave a comment Go to comments

What is the function of Accounting?
To tell the Truth: to pay taxes, to disclose to lenders/ regulatory bodies what they need to know to make decisions. Is your firm credit worthy? Did you pay your taxes in full? Oh, and are you making money?
But what happens when there is no money to be lent? When the Regulatory Agencies are asleep at the Wheel? The answer then is full employment for accountants: function be damned. The result of Enron was the full employment for accounting firms viz-a-viz the Sarbanes-Oxley Bill. Serves no function but to employ accountants, let the regulators believe they are serving the public interest, and let cheesy CFOs off the hook.
I cannot tell you how many times I have sat next to a small business owner as he/she looks at his/her bank balance (checking) at the end of the Year, and says “Is THAT my net income?”. How did the owners, who come up with the ideas, make the calls to get the seed capital, sell the customers on an unheard-of Product, come not to know whether they are making or losing money?
The answer is specialization. We go to college, get a Degree, work for an Industry for thirty years. What do we get? Maybe a pension worth a pittance, and a head full of specialized knowledge that let’s us do ONE THING FOR THIRTY YEARS. What? Is that all we can do?
If you are in Finance you may get an MBA but spend your working life looking at maybe two screens, and never see the Big Picture. MBAs can torture the hell out of a Macro (sure passed that test, didn’t ya?) but can’t do the calculation by hand of what the ‘formula line’ is. Having audited the work of Interns at Big Companies who crank out work, text in their sleep, and have no idea what- times- what- equals- what is an all too familiar sight. Neither can they pay bills, do payroll or buy an Insurance Package.
I personally think that is bogus. Why? It separates us from the actual running of a business. It means we are not cross-trained, and after a few years, if anything changes WE ARE VIRTUALLY UNEMPLOYABLE. There are very few generalists (if you can’t tell, I am one of them) because from High School on we que up by Industry: Law, Accounting, Science-Engineering/Artiste.
Why am I on this rant? I had to explain to a business owner today the difference between Book and Tax, various classes of Assets and the difference between a Profit & Loss Statement and a Balance Sheet. He had an MBA, but no idea what went into his accounting system, why his Balance Sheet was appalling, or what he should have asked his bookkeeper or his CPA months ago.
So then. What am I going to do about it? From now on, when there is no imminent disaster, I will write about the basics of business. Accounting, Business Start-up, Risk Management, Marketing, Technology, Web and online marketing, and yes, Taxes. I would like to demystify our overly specialized economy and let’s solve some of these problems together. I swear to God(ess) Almighty not to take money from any financial firms. No fingers crossed. Are you up for it?
My cat wants my lap back, and I know there is at least one more cheap beer in the fridge.
Peace Out.

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