What is accounting really?
Once I was giving a presentation to accounting students and posed this question to them. We learn debits, credits, generally accepted accounting principles, Internal Revenue Code, cash, accrual, other comprehensive basis of accounting, and the list goes on. But what is it really all about?
A simple answer we came up with is that accounting is a way to track things, as an input into decision making.
Usually after I say I do accounting, the rejoinder goes something like, “Oh, you must be good at math.” To which I reply, “Actually, I’m not really that good at math. Strangely, accounting really isn’t about math all that much (which nowadays computers tend to do anyways). It’s about how to group things: how they’re similar, dissimilar, their proportion to each other, their relation to each other, how they can be grouped and arranged, etc. For instance, what qualifies as revenue? And what makes another type of revenue different enough to list separately? And which should be subtotaled together, versus be assigned to a new list? Etc.” It’s a lot about association, distinction, and grouping.
Zooming out on this thought process a bit, accounting is, in a way, a form architectural design: how to arrange the various components to make a composition that holds weight. Or alternatively, it’s a frame, embedded with judgements and perspectives, through which to see the reality of a thing.
Ah, now we’re wading into deeper water. Behind all the “accounting standards codifications” is really a way of thinking, a philosophy, that’s informing, influencing, instructing us how to understand and judge financial transactions. But despite all our learnedness, and our 150-hour education requirement, and our deep and true professionalism, we don’t often, if ever, expose and spend time with this financial system of thought, this way of seeing the world. Much less often, even, do we ever share it with our customers.
But isn’t that what would help them so much? Isn’t that what’s at the core of the value we present them? Our value isn’t so much that they have to record a transaction this way or that for the bank. Nor that there’s a new form layout for taxable security sales. Rather, it’s the mindset with which they need to approach, evaluate, and think through their next financial decision that’s important. And it’s the principles that should undergird their entire financial plan that truly make a difference. We who think about these things, deal with these things, and help others work through these things day to day, we are perfectly positioned to be guides. Guides who have traveled the paths, have a feel for the bigger picture, and can help steer our customers to their unique and individual destinations.
Let’s develop those things. Let’s help our customers figure out what truly matters, and assist them in accounting for that.