The Beauty of Accounting

If you ask the one question from me, what is the beauty of accounting? I will say that beauty of accounting can be seen in its ability to allow accountant not only record transactions scientifically but helpful to analyze the whole company's position without any problem. A company who has billions of assets and millions of dollars turnover per day. But solid rules of accounting helps accountants to show correct financial and profitable position without any problem. Suppose, a person who do not know accounting but knows maths, economics, science and other educational area, can he tell us about the correct position of company? Can he tell us whether company is in loss or in profit? Can he tell company's financial position is strong or weak. NO, absolutely no. Because all other educational areas will not help.

 Even companies CEO do not know what is happening in the company when there are millions of dealing in the each corner of the world. But thanks to the beautiful system of accounting, it can give the power to accountant to know each asset's position without any problem.

When we see the whole beautiful building of accounting, we find that it is on a very very simple equation. Total assets = total liability + our total capital. Assets in our hand may be or 1 dollar and may be 1 billion dollars, its value is not more than our invested capital and our taken liabilities in the form of loan.

Online media explains the beauty of accounting with following way

1. Conversion of Expenses in Assets

CATANACH JR has written content "THE “BEAUTY” OF INTERNET COMPANY ACCOUNTING" in which he has explained, through accounting, it is very easy to convert expenses which are revenue nature in assets.

Given that several of these companies are struggling to achieve or maintain profitability, it is not surprising that they would try to record as an asset what really is an expense. And sure enough, we find several instances of this. For example, Demand Media capitalizes many different types of costs including content costs, registration and acquisition costs for undeveloped websites and internally developed software, as well as intangible assets acquired in acquisitions. How significant is this? Over 72 percent of the Company’s $590.1 million in total assets are intangible in nature! Now that takes cost capitalization to a new height…we’d probably try that too if we were losing as much money every year as they are (2011’s net loss was $18.5 million).

Linked In also plays this “game,” but with a new twist. The Company does do something quite interesting…it defers expensing $13.6 million in commissions already paid on non-cancelable subscription contracts, presumably to match the commission costs with the related revenue streams. Why stop there? Couldn’t you make the same argument for a whole host of other expenses as well? Maybe they did, but Deloitte didn’t buy it. Groupon and Zynga also have played a slightly different version of the cost capitalization game, by recording tax assets that presumably will lower future tax liabilities. In recording these tax assets, the companies reduce income tax expense in the income statement, thus improving the bottom line. The only problem is that a company must have future taxable income in order to use these alleged tax assets! Well, if the companies did this to mitigate their operating losses, the game has ended for Zynga, and soon will end for Groupon.
2. Automation in Accounting

It is the beauty of accounting, it can easily adjust with every any simple software. For example excel. We can make balance sheet, income statement and do some accounting analysis with excel. Every manual work of accounting can easily automate in any accounting software. In real sense, beauty of excel is the beauty of accounting which has explained excellfun youtube channel in his video tutorial.

3. Debits and Credits always Equal

In whole accounting theory is the based on the debit and credit. Total of debit and credit accounting. We can start it from journal entry. Journal entry's debit side will equal to its credit side. Then journal's debit total will equal to the credit total. We also have to equate debit side of one account to the credit side of same account. If there is any difference, it is transferred to debit or credit balance. Same account's debit balance will always equal to the credit balance of other accounts in trial balance. For making same all the incomes in credit balance with the debit balance of expenses, we show net profit or net loss. In end, all the trial balance balanced debit and credit accounts are transferred to balance sheet. Balance sheet's total assets and total liability will always equal. Luca Pacioli had written his book 
Summa de arithmetica, geometria, proportioni et proportionalit√† (Venice 1494) in which he explained that a person should not go to sleep at night until the debits equalled the credits.

4. Beauty of Accounting of Service Sector

In product selling and purchasing industry, it is very easy to record the purchase and sales account and  calculate profit or loss. But real beauty of accounting can be seen in service sector. For example, I can take the example of online advertising industry. Advertiser pays on the page views. The company like google have expert accountants who records the page views. On this basis, it gets its service charges. 






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Accounting Education: The Beauty of Accounting
The Beauty of Accounting
Accounting Education
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