In this video, I'm gonna give you three reasons why understanding Accounting is important
for non Accountants.
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Hey viewers is James here and welcome back to Accounting Stuff
the place where we discuss all things Accounting. I was wondering what topic to cover this week
so I started scrolling through the requests that you guys had sent me in the comments.
And by the way, a big thank you for those suggestions
because it really helps me out when it comes to planning out of these videos.
Anyways… I digress. I was scrolling through the comments and I
came across this one from Tushar Sachdeva.
I hope i'm pronouncing that right. Why is it important to learn Accounting for
Non Accountants? And i must admit this question got me wondering…
There are a few different ways you could go about tackling this one.
In the end i thought you guys might get the most value out of this
if i talked about ways in which an understanding of Accounting
can benefit the everyday person or Non-Accountant going about their day-to-day lives.
So Tushar… I hope that is what you meant,
and if it isn't then let me know in the comments below
and I'll see about making another video. I thought long and hard about this question
and came up with three ways that learning Accounting
can benefit a Non-Accountant. Don't forget to stick around til the end
because I've saved the best til last. But let’s not waste any more time.
Why is it important to learn Accounting for Non-Accountants?
I'm gonna explain why now. First of all, I think it's important to remind
ourselves what Accounting actually is because it could be a bit of an alien concept
to a Non-Accountant. Accounting is the systematic means of recording,
processing and summarising financial transactions.
Whew that's a mouthful! Yes it is, but I'm gonna break it down for
you. Accounting is a systematic process.
Systematic means it needs to be done consistently, on a regular basis.
It's a means of recording financial transactions. This relates to noting down the key details
of each and every financial transaction that
affects a business. It's also a way of processing that data that
you've gathered by classifying those transactions into separate
groups of related transactions
and analysing them in order to extract meaningful information from them.
The final step is summarising that information by producing reports showing your findings
and providing them to the various stakeholders. This could be your boss, management,
the owners of your business, shareholders or investors.
So that's what Accounting is. But what's the value of it to the everyday
person going about their lives like you or me?
The first place that I think Accounting comes in handy
is when it comes to setting Long Term Goals. Getting out of debt, buying a car,
buying a house, getting married, starting a business,
saving up for your kids education and your own retirement.
A key part of Accounting is forecasting. That's where Accountants look back at historical
data and make estimates and predictions
of where business will be in the future. These predictions can include
estimated sales what future expenses might be
and what the cash position might look like. These techniques can be applied in everyday
life when it comes to setting Long-Term Goals
because you'll be able to put a value on the future cost
of those goals, and knowing your income and expenses
you can create a savings plan, in order to help you reach those goals.
And that brings me onto reason number two… Budgeting.
Budgeting is where you set yourself short-term financial targets to help you achieve
that savings plan that you created when setting those long-term
goals. You might want to think of long term goals
as stuff you hope to achieve in 2 or 20 years,
or even longer if you're thinking that far ahead.
Whereas budgeting relates to a shorter period of time,
like a year or two, or even less.
Budgeting is a very important area of Accounting. It's where business says its sales targets
and spending limits for the coming year. This affects everyone that works at a company
because performance bonuses and salaries tend to be directly linked to the performance of
the business against its budget.
If a business surpasses its short-term goals, then great.
Everyone's happy and there's a chance the employees
might get rewarded with a bonus. However when a business misses those targets,
your chances of that bonus are looking a lot more bleak.
And in more extreme cases… people’s salaries could get reduced.
Or even worse… People could get fired.
These skills that you pick up when budgeting as an Accountant,
can be applied in everyday life towards your own budget.
There are many financially conscious people who create spreadsheets or write in journals
to track their income and expenses every day in order to help make sure they reach their
Long-Term Goals. I’m curious do you guys budget?
I would love to hear from you in the comments below.
Another way that Accounting comes in useful is when you're making Investment Decisions.
Investing is where you lay down your money now
with the expectation that you'll see a return or a profit in the future.
Businesses invest in assets all the time in the hope that they will generate future
earnings. And it’s the reports created by Accountants
that help management decide where to allocate the resources available to them.
In addition to this the financial statements that listed companies
are obliged to prepare and make available to the public
are created by their Accountants. Investors read over these statements
and decide whether to buy shares in companies off the back of this information.
As individuals, we make loads of investment decisions
throughout our lifetimes, and those aren’t limited to the stock exchange.
We invest in our education, our car, our house.
We also invest our time in relationships, and in exercising to get fit.
The skills learnt in Accounting can’t help us with all of these
but where the rewards are financial it certainly can.
It enables us to work out the return on our investments
and compare them against each other to help us make the decisions
that are best for us. Now I said I was only gonna give you three
reasons why learning Accounting can benefit Non-Accountants.
But I've got a fourth, and I'd really like to share it with you.
I think this one's the most important, and it kind of encompasses the three that
we just talked about. Financial Literacy.
Becoming financially literate is the process of
educating yourself to being able to manage your money,
your personal finances, and your investments efficiently and effectively.
It's one of the most important skills that you can have in adult life,
but it doesn't seem to get taught much at school.
Becoming financially literate can literally change your life
and make your dreams come true… Or at least some of them.
It won't be able to get you a new boyfriend or girlfriend,
but it will help you by creating a stable platform
to help other areas of your life flourish.
It teaches you to budget and save, the value of money and interest,
and how to navigate your way through all that financial jargon that's thrown us
everyday. Accounting can teach you to become financially
literate. It's not the only way to get there…
there are other ways too. But studying Accounting is a surefire way
to ensure that you commit the time and energy required
in order to build this life skill. So Tushar,
thanks again for your suggestion and I hope that answers your question.
And to the rest of you Accountants and Non Accountants out there…
if you found this video useful give it a like,
share it, subscribe if you haven't already,
and don't forget to hit that notification bell
so you don't miss out in the next video. If you can think of any other life skills
that Accounting teaches us I'd like to hear your thoughts in the comments
below. If you're interested in learning more about
Accounting, I've put together a playlist on Accounting
Basics that you might want to check out.
I release new videos every Monday here on this channel
so come join us, and as always,
see you in the next video!
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