Hey friends. Having spent my career as an accounting professor, I’ve often come across people who, when they hear the term “accounting,” respond abruptly with “I hate math.” Indeed there is a fairly broad misconception that accounting is primarily about math and is therefore a hard and unpleasant subject to learn or discuss. Let me explain.

Few would argue about whether the practice of generating accounting reports is a fairly difficult subject to master. It’s no walk in the park. However, the misconception is that accounting is hard because it’s primarily about math. While it involves the field of numbers, accounting is not hard because of the math involved with dealing with numbers. One mostly does addition, subtraction, multiplication and division when cranking out the numbers to be recorded via debits and credits. There’s no sophisticated math involved.

What makes accounting seemingly difficult is all the language involved in maintaining a set of books on financial events and culminating all those recorded events into a set of reports (statements) periodically. It’s all the “words” that have to be learned and applied — but it’s not the math that’s intimidating.

If you took the single word “asset,” you’d find the technical definition is “a probable future economic benefit obtained or controlled by a particular entity as a result of past transactions or events.” I know; that’s a mouthful. In everyday language, an asset is a resource that you can use to generate or produce a return (wealth). In the practice of accounting, an asset has to be defined very, very precisely so that we can observe a financial event and capture the essence of it.

I guess the best answer to the question of whether accounting is hard to grasp is one of perspective. If we are talking about the practice of capturing the events in accordance with defined rules and guidelines, it is hard to grasp all the technical language involved in its application. If we are talking about using the output, the terminology becomes much more straightforward and doesn’t require experiencing migraines to grasp.

See you next time.