Why are Accounting Facts Important than Emotions

Recently, my best friend came to me for getting loan from me for buying new business stock and repaying debt. I have big attachment with him. He was pressuring on me because he knows that I love him deeply. But, he forgot, I take breath in accounting. Before giving money to anyone, I think about whether accounting facts allow me to do this or not. Whether my investment is safe or not.

Following are main reasons behind Accounting Facts are important than emotions which is production of other's mind and it is just input like film actor affects with his acting but in reality, he is just hero of the film. Reality is different what is in film.

1. Accounting Facts Save Your Money from Loss 

Accounting facts will save your money because you can not invest money in a business which is already facing loss.

2. Accounting Facts will Give You Eyes 

Accounting facts will give you eyes which is better for your money's growth. Emotion may be ignorance of your mind what you can not see. Today, your friend loves you because you have the money but tomorrow, he will hate you because you do not have the money. So, keep money always in your pocket because he will love to you always.

3. Money is best slave but it is bad master

Money is best slave but it is bad master. So, if you want to keep this slave, you have to do work with money instead for money. Your best friend can give you greed of high return but accounting facts will save from it.

I am showing you the infographics of my friend's financial statement. After reading his balance sheet, I did not give loan to him.



Now, what I can expect my return on my given loan to my friend.


1. My friend has already taken loan 85% of his total assets and still, he is facing loss 30.8%. It means, he could not use the loan effective way. Now two major result from it.

a) Just he has 15% rest asset which is available but his demanding loan is more than this and I am feeling unsecured due to accounting fact.

b) Accounting facts also indicate, he does not know good selling skills or he is consuming loan for personal use. Due to lack of working capital, his losses are increasing. If he will use my loan for personal purpose, I can not do anything.

2. My friend's next 15% asset is not safe. Customer bought him at credit which is 10% of total asset. So, it is not necessary, he will get money from him. He may face bad debt.  One of the reason of loss may be this. Second, 5% of total asset means raw material, he is taking on credit. It means if he will not pay the purchase price, creditor will claim first and I will only loss money because he has Zero asset for giving to me.

So, I leave this fake emotions and I did not give loan to my friend. If your friend is also trying to get money through his emotional effect, be aware from it. Learn Balance Sheet and or learn to make rough balance sheet of your friend and learn to read it and if it is showing that it is risky to your investment. Never give loan to your friend at any cost.

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Accounting Education: Why are Accounting Facts Important than Emotions
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