Accounting and Bookkeeping are the language of business. Well what is business?
Business is like somebody buying apples, making apple juice and then taking his stuff that he made and selling it to somebody with money.
They make an exchange and it’s all good.
Another way to look at business is that it is a magical box. You take raw materials, put it in the box and then it comes out as goods that you can then sell and make money. That box is business.
Let’s say you have a business. You make something that costs you $100 to make and you sell it for $200. And you’re happy!@ You made profit of $100. I just told you a story about a profitable business that made $100!
So who should we tell our story to? You might want to tell your story to banks or investors. Banks or investors might want to hear your story because they might want to lend you money or invest money in your business.
Another person who might want to know your story is The Tax Man! He wants to tax you.
We can break it down to 3 people who want to hear your story.
The language in which we tell we stories is sometimes called
- People on the inside – or internal users
- People on the outside – external users.
- The Government.
‘Managerial accounting’ for internal users,
Financial accounting for external users; and
Taxation accounting for Government users..
The actual language that external users want to hear your information in is GAAP - Generally Accepted Accounting Principles.
The Govt wants to hear your story based on the Australian Accounting Standards
Now, internal users – what is name of the language that they want to hear? It can be whatever you want. There is no standard managerial accounting language.
Bookkeepers know the language of business and also know the requirements of the tax office. Bookkeeping allows the business owner to work with the numbers that matter. Want to know more or Learn about bookkeeping