What is accounting?

By:  Stephen Williams, CPA

Accounting is the management and flow of numbers that support transactions.  These numbers can then be used to evaluate events and time periods for trends and interpretations. 

Understanding the relationships of numbers can be the difference between success and failure of an endeavor.  Simply stated income over expenses equals profit.  However, this in itself does not necessarily mean victory.  If we are fortunate enough to make profit we then have to be able to collect it (cash flow).  Once collected we then need to determine an advantageous way to extract this profit. 

Not doing our accounting consistently or not paying attention to it can be destructive.  Activity does not mean effectiveness.  Large sales volume can mean large losses if not watched and controlled. 

Accounting is a language and discipline not understood by many.  This mystery keeps accountants in demand and business owners seeking to understand.

Financial markets are continually driven by this science.  Good numbers usually dictate good results while poor numbers inevitably point to downward movements.

What frustrates us can also enlighten our perspective.  As the saying goes numbers do not lie.