G'day it's Justin Hogg from Right Source we're doing accounting basics helping those
of you out there who want to know what the hell it is your accountant does helping you
get a bit of an insight into what it is they do and how they help your business
today what I wanted to talk about was why do we do accounting at all? What is
the purpose of accounting? Like stepping back and going well that's great but why
why is it here? Now for me the purpose of accounting is its first you need to
understand that accounting isn't real so it's something I talked about a lot is
that accounting is a construct it's some rules and some mechanics that you follow
but it actually in itself is it isn't real what accounting is it allows you to
create a reflection of reality so by using accounting or accounting methods
what you are able to do is to create a picture of your business or of your
personal assets or of how things are going or the money that's flowing
or the value that's flying around so accounting is really about creating a
picture of reality but in itself isn't real so it's like looking through your
television set you're not looking at anything real what's on the TV screen
the TV screen isn't actually what's really happening it's happening
somewhere else that's getting filmed but it allows you to see it
in a way that allows you to understand something and to get a better picture of
what's going on because accounting is about creating a picture for your
business the importance is about that picture meaning something to you now we
talk about accounting not being real or real and accounting being about rules
and guidelines that means there's actually more there's always more than
one way to do something so if your picture of your business that you're
accounting process is creating doesn't mean something to you, change it, because
there's more than one way to do it and you need to find a way either working
with your accountant or if your accountant can't do that find another
accountant who can that helps create a picture for you that makes sense in
terms of how your business is going and how your business is operating and
actually creates value in terms of when you look at it
it gives you a sense of the reality that is your business now that's the that's
the big picture now every picture is made up of pixels now the part of accounting
that is important is that all these rules actually relate right down to lots
and lots and lots of little transactions now each of these transactions
effectively consists a pixel of the picture that is your business so it's
important for each of these pieces of information to be done or data to be
captured correctly now you'll hear people talk about being materially
correct or it's close enough well yes that is the concept if you want your
picture to be blurry, if you want your picture of your business to be
crystal sharp well then you want to make sure that your data is getting captured
accurately and consistently so that you have a clear picture of what your
business is doing so I always like to have processes in place that is
capturing data in a very consistent and clear way but obviously a very efficient
way because you don't want to spend a lot of time collecting that data you
want the picture to get generated as quickly and effortlessly as possible
so that's really what accounting, why do we do accounting? Well we do
accounting to create a picture of your business to understand the reality and
to use a set of concepts and rules to create that picture hopefully that's
giving you guys an idea of the purpose of accounting so that when you're
talking with your accountant or you're looking at your financials or you're
using an accounting package you understand what it is you're actually
trying to achieve through doing that so that hopefully you get a bit more out of
it, if there's more you want to find out about the wonderful world of accounting
check out the YouTube channel we've got four Right Source there's a lot of
different tips, some templates there you can grab, feel free to subscribe because
then you can get updates coming through to you automatically otherwise I'll talk
to you guys next time it's Justin Hogg from Right Source