Accounting is defined as the bookkeeping methods involved in recording business transactions and preparing the financial statements of a business. The reach of accounting within a company is so much more than that. Accounting information is used for decision making, purchasing, hiring employees, and borrowing money.
The quality of financial decisions are directly related to the quality of the information those decisions are based on. It follows that having accurate accounting information is essential to making sound business decisions. The collapse of the housing and mortgage industries can be partially attributed to the value of the information or lack of information that were the basis of decisions made to lend money and to borrow money. Due to the magnitude of banking failures it will not be a surprise to see further regulations in the financial industries. And with that, there is a further need for everyone to become more aware of the information that they are presented with to be able to make better, more informed decisions.
Accounting is not limited to just business. We all put on the accountant’s hat when we make personal financial decisions. Keeping track of your checking account is key to making sure that you are not spending more than you have coming in. We all start with a budget, whether formal or informal. The reality of budgeting our personal finances has become a priority with the fluctuation of gas, oil and food prices.
Budgeting is the accounting version of goal setting. Budgets allow us to better manage our resources. They allow us to see where we can cut costs, spend more wisely, and see what we really need for income. Understanding what our needs are, as a business or individual, gives us more control over the decisions that we make regarding our finances.
The economic environment does not have to leave you feeling helpless in managing your resources. Improve your accounting skills and habits to manage your resources and to help bring balance into every part of your life. We each wear many hats in life. When you put on your accountant’s hat you can do so with greater confidence when you have better tools for managing your money.