When you tell your friends that you’ve signed up for an accounting class, you’ll likely get a reaction that sounds something like this: "Ugh, why?" Or, perhaps they will be slightly more sympathetic and say, "Oh, sorry to hear that."
Accounting gets a bad rap, but it's an incredibly useful subject to learn. Plus, it's not as complicated as you might think! Hear me out - here are four reasons why everyone can benefit from understanding basic accounting.
1) So you don’t get ripped off!
Buying a car is a big investment. It can be overwhelming to try to negotiate a better price, so why not walk in with confidence, knowing you understand how a business like a car dealership is run and the ways you can get a better deal? If you’ve had an introduction to accounting, you’ll know that the car you’re about to buy is on the car dealer’s balance sheet as inventory. You’ll also know that in order to keep the car dealership operating, they must make a profit on the car (you can still talk ’em down; they don’t need that much profit).
Once you drive away, the car is taken out of the dealer’s inventory and payment received (cash or loan), as well as profit are recorded. You also know that most dealerships work on a monthly sales cycle and have quotas for the amount of inventory they need to turn over in the given time period. With this understanding, you can walk in at the end of the month, explain what you’re looking for, provide comps on similar cars at other dealerships, and walk out with a better price on your dream car (and probably the respect of the salesperson).
2) So you aren't intimidated by your own finances.
Be honest, can you explain where all of your money goes after your paycheck gets deposited? Even if you’ve managed to find a job that pays the bills (collective sigh of relief from all of the parents out there), it can seem impossible to set aside money for savings each month. With some accounting knowledge under your belt, you will gain a much deeper understanding of what goes on with your own finances and learn important skills like how to effectively track expenses and work within a budget.
Many people use the excuse that they are "no good at math" to explain their reluctance to study accounting, but the math actually involved is quite basic. If you can add and subtract, multiply and divide, you are set! With your new savings savvy, maybe you can save up enough to send your parents on a cruise as a thank you for the many years they supplemented your meager earnings!
3) So you can make better sense of current events.
There is no shortage of scandal in the accounting world. You’d be hard-pressed to turn on the news and not hear about a recent manipulation of numbers that has caused thousands of people to lose their shirts. Just like any industry, there will always be people who play by the rules and people who don’t. Why trust the media to fully explain what happened in an unbiased way? With a basic understanding of accounting, you can understand what these companies have done wrong and why it matters. You can even explain it to your friends and sound really smart at cocktail parties!
4) So you can impress your boss.
Picture this: You’re in a staff meeting and the CFO wants to discuss the past quarter’s financials. If you’ve had an introduction to accounting, you’ll not only be able to understand what the CFO is talking about, but you’ll also be able to chime in with your own financial wisdom and impress not only the CFO, but also your supervisor and all of your coworkers who are nodding their heads blindly and hoping no one calls on them.
Want to learn the language of business and develop an essential understanding of financial accounting, business analytics, and economics for managers? You may be interested in HBX CORe, an interactive online program from Harvard Business School!