[HN Gopher] Learn accounting for free
___________________________________________________________________
Learn accounting for free
Author : mooreds
Score : 244 points
Date : 2021-12-20 14:58 UTC (8 hours ago)
(HTM) web link (www.accountingcoach.com)
(TXT) w3m dump (www.accountingcoach.com)
| asimpletune wrote:
| A really good way to learn accounting is to read the GnuCash
| manual. It's both excellent software documentation and you have
| to learn the fundamentals of accounting to follow it.
| DantesKite wrote:
| Has anyone taken this course?
|
| On a side note, it's too bad there's no easy way to assess the
| quality of educational courses. You think there would be a
| standardized metric by now.
| nubela wrote:
| Is there an eBook version of this?
| mooreds wrote:
| Looks like there is are PDFs available if you pay for them.
|
| From https://www.accountingcoach.com/about :
|
| > PDF versions of all our Core Materials
|
| From clicking through the "Learn More" link, seems like a one-
| time fee of $49 gets you the PDFs. (As Patio11 would say, the
| author should raise his prices.)
| hbcondo714 wrote:
| > You can access a corporation's Form 10-K by going to the
| Investor Relations section of the corporation's website[1]
|
| Shameless plug: you can try https://Last10K.com to get 10-K
| annual reports aggregated in one site. This includes all
| financial statements (ex.Balance Sheets) broken out so you don't
| have to find them in a lengthy 10-K.
|
| [1] https://www.accountingcoach.com/balance-sheet-
| new/explanatio...
| r00fus wrote:
| Work in the FINs domain, and have been using this for years to
| teach basics to newbies. Great stuff.
| PopAlongKid wrote:
| I did not see any topics at the posted link devoted to tax
| accounting. Most small businesses (U.S., at least) have a lot of
| flexibility in how they keep their company books, but the core
| process of preparing the tax return involves making appropriate
| book-to-tax adjustments according to tax law. So the company will
| have at least two versions of the key reports, one for book
| purposes and one for tax purposes.
| onphonenow wrote:
| I'm not a fan of debits / credits for folks not going into
| accounting properly.
|
| Porter has a book - the alternatives to debits and credits, using
| financial information.
|
| Basically accounting is an equation you keep in balance.
|
| Assets = Liabilities + Equity
|
| You can understand how any transaction "posts" by keeping this
| equation in balance (or solving it).
|
| You borrowed $100K? Your liabilities are + 100K, and cash (an
| asset) is also + 100K. Books in balance.
|
| (Change in) Equity = Income - Expense
|
| Extends this formula to your profit and loss statement if needed.
| Errors accumulate in the balance sheet as well.
|
| Note that balance sheet is more important. With two balance
| sheets at different times I can see my net income for that period
| (no categorization of income / expense needed).
| darcys22 wrote:
| I find what you have said harder to follow than just knowing
| debits are positive and credits are negative.
|
| The A=L+OE formula is a poor model for understanding accounting
| when the accounts dont fall neatly into those 5 high level
| categories. And unfortunately you almost immediately encounter
| accounts of that nature (accumulated depreciation and loans are
| great examples).
| onphonenow wrote:
| What happens if I debit a loan account? Debits are not
| positive, a debit to a loan account is a negative that
| reduces it. If I issue a refund that might be a debit to an
| income account (that is a negative to the account total).
| PopAlongKid wrote:
| >debits are positive and credits are negative
|
| That's a drastic oversimplification. Typically, both debits
| and credits are entered into an accounting program as
| positive numbers, and it is the nature of the account being
| debited or credited that determines whether the number is
| added to or subtracted from the account balance.
|
| Or, as the old joke goes, an accountant for years would
| always start the work day by opening a locked desk drawer,
| removing a piece of paper, and studying it for a moment
| before returning it to the drawer. After his sudden and
| unexpected death one day, one of his staff had to satisfy
| their curiosity and opened the drawer to see what was written
| on the paper. It said, "debits to the window, credits to the
| door".
|
| To get it, you need to know that by tradition, debits are
| entered on the left-hand side of the entry form, and credits
| on the right hand side.
| EvanAnderson wrote:
| All accounts "fall neatly" into the broad categories, though.
| There are sub-categories for accounts with contrary normal
| balances for a given type of a given account category but
| they still summarize into their parent category.
|
| A contra-equity account (like "Owner draws") has a normal
| debit balance. That's contrary to the normal credit balance
| of an equity account. It still summarizes to equity and
| results in the owner's draws being debited from the owner's
| equity debit balance.
|
| When I hear programmers talking about debits / credits like
| they're positive or negative I get a feeling that they're
| trying to re-invent a really simple "wheel" that they don't
| want to understand. It reminds me of wild gyrations
| programmers go thru w/ ORM's to avoid just learning some SQL.
| natpalmer1776 wrote:
| This is really cool!
|
| I constantly hear people complaining about accountants creating
| problems by not understanding how "things really work" so it
| would be great to be able to see things from an accounting
| perspective!
| acjohnson55 wrote:
| That's like a baseball player telling a Newtonian physicist
| that they don't understand how things really work. In some
| sense they're right, in that there are higher level details
| that are hard to capture in the math, and technically, the math
| does not describe an even lower level of reality. But there's
| still a lot that someone operating from an intuitive
| understanding can learn from someone who brings an analytical
| framework.
| cascom wrote:
| haha, few things from my experience:
|
| 1)its terrifying how many people in c-suite roles (including
| purported CFOs and CEOs), and commercial/sales/product
| development roles don't actually understand accounting and
| finance basics.
|
| 2) the number of bookkeepers that pretend to be real
| accountants, but really they are just power users of a given
| accounting system
|
| 3) the massive miscommunication that takes place when two
| people that don't know what they are talking about try to tell
| the other what to do.
| zerop wrote:
| Pardon my ignorance if any, but I find financials and accounting
| as quite boring things. Most problems in these are about tracing
| numbers, reconciliation and mismatches. What thril one can face
| in these areas? Any examples of challenges you see ?
| conductr wrote:
| I think accounting has that reputation for a reason, it really
| is bean counting
|
| All this is theory and essentially a bunch of "hello world"
| equivalents. In the real world, corporate accounting is much
| more complex for most companies. I don't know if it makes it
| more thrilling, but it can be challenging.
| whartung wrote:
| Modern data processing is all about work flows and data flows,
| and accounting is gorged with that stuff.
|
| There's a reason that there are 3000 different businesses, but
| 6000 different accounting packages. At a glance, they're all
| the same. But accounting data processing is all about the last
| mile. That 10% that the company does differently.
|
| Now, when folks say "accounting" they typically mean General
| Ledger, Accounts Payable, and Account Receivable (GLAPAR as we
| called it). In truth, it's really about the General Ledger,
| everything is else is about feeding the GL. Most of the reports
| come from the GL.
|
| GL is where all the numbers are tallied up. AP is stuff you owe
| people. AR is stuff people owes you. Then you have the
| distribution systems that tend to fee AP and AR. (Mind these
| are all broad strokes.)
|
| Consider an Amazon order. You went to the site and ordered a
| radio and stick of deodorant. Honestly, the mind reels about
| the accounting impact of that order.
|
| Amazon has to account for the money you're paying, the value of
| the goods sold, the taxes (potentially multiple jurisdictions),
| the shipping, and the credit card fees. Meanwhile, the costs of
| those goods include not just the value of the goods, the labor
| involved in taking off a truck, putting it on a shelf, taking
| it off a shelf and putting it on a truck. The cost of the box.
| The cost of the label.
|
| ALL of that hits the GL in to its own slot, in its own account.
| The total number of GL entries for a single order is probably
| dozens, even for simple orders (no doubt it gets more fun with
| associates and folks selling through Amazon, etc. etc.). This
| is where all that chasing of imbalances happens. With double
| entry accounting, everything has to balance.
|
| And worse, not only is it explosive in its detail, it can
| CHANGE, at any time! Business change their minds on how they
| track things, what they want to track, when they want to track.
| It could be marketing asking questions, it could be regulatory,
| it could be anything. It's a very dynamic environment.
|
| At one place I had to rewrite pricing and discount logic every
| 6 months as they came up with new schemes. (Oh, and don't
| forget, all of the OLD schemes are still in play -- don't think
| you can forget about those when someone calls up 90 days later
| asking for a credit). And you'd think you could do something
| "generic". No. The marketing people are very creative.
|
| At one place, a smaller business, probably cut 100 checks a
| week. They had a product canceled. Thousands of refunds. We had
| to run several large boxes of checks through the band printer.
| I can not convey to you briefly how impactful that process was.
| "Cutting a check", I hope you can imagine, is a very controlled
| process, and we had to stomp through the lot of the internal
| workflows to get that done. Lots of eyes were on the process.
| (Remember, the pre-printed check numbers had to match the
| transactions in the system, let's hope the paper doesn't jam.)
| Outside in, it seems stupid, boring, and silly. When you're in
| the thick of it, it's like a rocket launch. Lot of time
| invested it getting this all right.
|
| As data processing people, we strive to manage complexity. Our
| job is to make the systems and processes accessible to the
| people who rely on them, and as well as adapt to their ever
| changing needs for the business.
|
| Working back office accounting and distribution is a
| surprisingly target rich environment for interesting work that
| can be crushed in detail. But our job is to wrangle that.
|
| You don't need to be an accountant to do this, but it's good to
| learn the vocabulary: debits, credits, journals, posting,
| agings, etc. etc.
|
| And, finally, everyone does this. Having "accounting"
| experience pretty much qualifies you for all sorts of
| businesses. Each one you have to learn a little bit of domain
| knowledge, but the accounting terms themselves are a common
| grounding that gets your foot in the door. I've written systems
| for warehousing, meat brokers, paint shops, plant growers, auto
| parts, and magazine publishing, just as a start.
|
| Honestly, it beats healthcare.
| calderarrow wrote:
| I'm a CPA and have undergraduate and graduate degrees in
| accounting. To be completely honest, the bulk of financial
| accounting is not that thrilling. The bulk of the profession is
| spent keeping up with the regulations for tracing numbers,
| reconciling schedules, and "accounting" for things.
|
| But let me share what makes the field thrilling for me:
|
| Accounting is a universal language for valuing time. Clocks
| allow us to measure time, but accounting allows us to assign
| time value. It, quite literally, allows us to compare apples to
| oranges (or Apple to Amazon).
|
| This is important because time is the single most valuable
| resource any of us have. It's both the scarcest resource and
| the most liquid, but it's only liquid in one direction. Time
| can be exchanged for anything: food, drink, entertainment,
| love, death. But nothing can be exchanged for more time in my
| life.
|
| We can, however, exchange our time for the time of others.
| Without being able to do this, our quality of lives would be
| terrible. But how many of my programming-hours is worth a
| T-shirt? How many chai-latte-making-hours is worth a heart
| transplant? It's not enough to count the hours, we have to
| assign value to the hours. Accounting is the system and
| language we use to value different units of time. It's a
| universally applicable language that is consistent in its
| application. It applies to a child running a lemonade stand and
| trillion dollar multinationals. Whether you're a charity or a
| bank, a government or a revolutionary, the rules of accounting
| are applicable to whatever it is that you're doing, whatever is
| it that you've done in the past, and whatever it is that you'll
| do in the future.
|
| Currently, I work as a software engineer for a fintech company,
| and I find that the most fun I have at work is engineering
| something from scratch. Thinking of the architecture, mocking
| up the algorithms, and implementing a new solution to a problem
| is vastly more thrilling than maintaining existing systems or
| hotfixing minor bugs. Yet, the bulk of my job is maintaining
| systems that other people built. And, if I'm being honest,
| sometimes boring.
|
| Similarly, the thrill of accounting is in learning how to more
| appropriately account for transactions, new goods, or new
| services. How should we account for someone who mines a crypto
| currency? How should we account for someone who trades a crypto
| but doesn't mine it? How do we account for auto insurance for
| self-driving cars? These are the thrilling aspects of
| accounting.
|
| But for the bulk of the job, it's probably a bit boring.
| Working on a team to fix other people's technical mistakes.
| Reviewing documentation, getting access to various systems.
| Sounds a bit like software engineering!
| cascom wrote:
| my two cents - bookkeeping (the act of doing all the
| transactions that result in financial statements) is quite
| boring, but at the end of the day the purpose of accounting is
| to provide information around the financial condition and
| results of the business, which it turn is and should be used to
| make decisions around the future of the business.
|
| Accounting (in its various forms (financial, cost, mgmt, tax))
| should help you answer questions like: what is our most
| profitable product? how much does it cost to make that product?
| was that acquisition/investment successful? sales are going up
| and net income is positive, why don't we have any cash?
|
| But when you get under the hood, there is a lot of subjectivity
| around how to make accruals, allocate revenue and expenses, or
| capitalization policies.
|
| Furthermore, many people in different organizations are
| incented on financial metrics (sales, EBITDA, EPS, equity
| value, etc) and as such have are keenly focused on gamesmanship
| around the calculation of those numbers.
| r00fus wrote:
| I see accounting as the money version of a historical account
| of a company. In that vein, it's the complete data flow of
| money movements within said company - data from which you could
| determine strategic priorities, fraud, and power structure,
| among other things with the right analysis.
|
| I wonder if there's a good flick that shows how powerful a
| forensic accountant can be.
| PopAlongKid wrote:
| >I wonder if there's a good flick that shows how powerful a
| forensic accountant can be.
|
| "The Accountant" starring Ben Affleck has it as a plot
| element.
| acjohnson55 wrote:
| I felt the same way until I decided that I needed to understand
| what was happening with every dollar my wife and I took in, in
| order for us to make decisions like how much we should invest
| or keep in savings for emergencies. I ran into all sorts of
| issues reconciling different information and had to revisit my
| modeling several times.
|
| Only after discussing with my brother, who went to business
| school, did I realize I was gradually discovering my own half-
| assed version of accounting. Then I started reading Wikipedia
| and Investopedia about accounting topics, and it seemed a lot
| less dry.
| rchaud wrote:
| > What thril one can face in these areas? Any examples of
| challenges you see ?
|
| Mission Briefing:
|
| Your CEO has blurted out a revenue growth estimate for H2 2022
| on an investor conference call, without prior vetting from the
| CFO.
|
| Mission Objective:
|
| Put forward a plan for modifying revenue recognition rules on
| sales so that the CEO's estimate can be met. Your plan must be
| compliant with GAAP principles and cannot involve backdating or
| forward-dating revenue by adjusting the refund eligibility
| dates.
| rahimnathwani wrote:
| Background: I'm a qualified accountant, and have taught courses
| on accounting and finance.
|
| My thoughts on OP:
|
| I read through the first two parts of the first course on this
| site:
|
| - Part 1 Introduction to Accounting Basics, A Story for Relating
| to Accounting Basics
|
| - Part 2 Income Statement
|
| Based on what I read, I could not recommend this. You could get
| to the end of the 'income statement' part, without encountering
| any definition of 'profit', which is the very thing that the
| income statement is meant to show.
|
| If you want a solid introduction to accounting, I'd recommend
| Frank Wood's book "Business Accounting 1". You don't need the
| latest (15th edition). The principles haven't changed. I used the
| 10th edition: Business Accounting Volume 1
| https://www.amazon.co.uk/dp/0273681494/
| tomnipotent wrote:
| I do not believe that either GAAP or IFRS has a standard
| definition for "profit". Even GAAP under 703(a) refers to it as
| net income (and several other related numbers like gross
| profit).
| antman wrote:
| Would reading IFRS suffice? Is there a suggested book?
| rahimnathwani wrote:
| The IFRS standards presume the reader is familiar with
| accounting principles and practice. They provide guidance
| specific to (i) certain more complex/unusual situations,
| e.g. business combinations, and (ii) specific verticals,
| e.g. consumer lending and insurance.
| rahimnathwani wrote:
| Yes profit is the same as net income.
|
| But you wouldn't know that if you read those two sections of
| the text. They use the word 'profitability' several times,
| without ever defining it.
|
| Right at the end of part 2 (income statement), they say this:
|
| "The difference (or "net") between the revenues and expenses
| for Direct Delivery is often referred to as the bottom line
| and it is labeled as either Net Income or Net Loss."
|
| The above is true, but it's kind of hard to grasp for someone
| whose only exposure to accounting is this site. And the
| previous sentence again refers to 'profitability' without
| being explicit that 'profit' and 'net income' are the same
| thing.
| nightski wrote:
| If you go to the actual section on financial
| statements/income statement it breaks it down much further
| which is what I would expect.
| rahimnathwani wrote:
| Which part of which section? (I only looked at section 1,
| parts 1 and 2.)
| Closi wrote:
| Well, net profit is the same as net income.
|
| Gross profit is different.
| xboxnolifes wrote:
| The point isn't about whether they are the same or not.
| The point is the the _teaching_ material isn 't very
| clear on the terminology used.
| rahimnathwani wrote:
| If you're a mathy person, you might find this brief explanation
| is enough to get going. Where I say 'you', I mean 'your
| company', not you personally.
|
| * Assets: things you own (e.g. tractor, money in bank, money
| owed by customers)
|
| * Liabilities: things you owe (e.g. unpaid supplier bills, loan
| owed to bank)
|
| * Assets and liabilities are both measured in a single currency
| (e.g. $).
|
| * Equity (aka 'book value'): A measure of the value of the
| company. Calculated as Assets minus Liabilities.
|
| Two ways to write the equation above:
|
| * Equity = Assets - Liabilities
|
| * Equity + Liabilities = Assets
|
| Equity changes in response to (i) company operations, and (ii)
| financing activities.
|
| Financing activities are things like:
|
| - selling new shares
|
| - buying back shares (or paying dividends)
|
| - borrowing money (bank loans, or issuing bonds)
|
| If there were no financing activities in the period, then
| profit is the derivative of equity with respect to time. It's a
| measure of the change in (book) value over a period.
|
| If book value went up, you made a profit. If book value went
| down, you made a loss.
|
| (Of course, book value would also go up if you just sold some
| shares, and profit doesn't count those changes, as they're just
| financing activities.)
| haberman wrote:
| This blog entry taught me a mathy way of understanding
| double-entry accounting:
| https://martin.kleppmann.com/2011/03/07/accounting-for-
| compu...
|
| Summarized: a ledger is a directed graph of accounts, where
| edges are transactions, and each transaction is recorded
| twice: in the "from" node and the "to" node.
| rahimnathwani wrote:
| The article is mostly correct[0], and is very good if the
| explanation clicks for you.
|
| I suspect some people (even some HN readers) would find it
| easier to think of ledgers as lists of transactions with
| running totals.
|
| [0] e.g. it's not strictly true that book value is a lower
| bound on company value
| antaviana wrote:
| AFAIK, borrowing money does not change Equity, because it
| increases Assets (more money in the bank) and Liabilities
| (more debt) by the same amount so Equity stays the same.
| xbryanx wrote:
| Where are you borrowing this money without any interest?
| "Money you borrow" and "cost to borrow that money" are
| rarely the same value.
| dragonwriter wrote:
| Normal interest that will be charged if the debt is not
| paid off is initially neither an asset or liability, it
| is an expense as it is charged.
| rahimnathwani wrote:
| If you take a $1MM loan from a bank:
|
| - Your bank account (an asset) goes up by $1MM
|
| - Your loan account (a liability) goes up by $1MM
|
| So equity is unchanged at that point.
|
| But every month after that, you'll be charged interest:
|
| - Loan account (liability) increases (CR)
|
| - P+L account (equity) decreases (DR)
| ALittleLight wrote:
| Presumably you'd have to pay back more than you get in
| the loan, right? Wouldn't your liability increase by more
| than a million dollars?
| brewdad wrote:
| Not until the interest accrues. You could (no idea why
| you would) borrow $1MM and immediately pay it back before
| owing any interest. You would need to reflect this on
| your books but nothing material has changed.
| riccardomc wrote:
| This is true in a perfect market, based on Modigliani-
| Miller theory of capital structure.
|
| In reality, increasing debt to a certain point also
| increases risk, which in turn increases return on equity.
| rahimnathwani wrote:
| A change in return on equity isn't the same as a change
| in equity.
|
| When a company takes a loan, even if that loan is so
| large as to make insolvency almost inevitable, there is
| no impact on equity (book value).
| mcguire wrote:
| * should increase return on equity. :-)
| rahimnathwani wrote:
| Sorry, yes, I should have been more clear!
|
| 1. Profit/loss measures changes in equity resulting from
| operating activity, as opposed to financing activities
| (which just rearrange how the company is financed).
|
| 2. Examples of financing activities are taking out (or
| paying back) loans, issuing (or buying back) shares, and
| issuing dividends.
|
| 3. Some (not all, as you point out!) of those financing
| activities will increase or decrease equity. So, when
| thinking about profit as the rate of change of book value,
| you should be careful add back any changes that are the
| result of financing activities. (specifically: ignore
| changes in equity due to money going to, or coming from,
| shareholders)
| arbuge wrote:
| This brings back memories. We Frank Wood's BA1 to learn
| accounting at O-Level back in the late 80s in Malta! I wonder
| what edition that one was...
| solatic wrote:
| > Based on what I read, I could not recommend this. You could
| get to the end of the 'income statement' part, without
| encountering any definition of 'profit', which is the very
| thing that the income statement is meant to show.
|
| The thing is, that while cash is a matter of fact, profit is a
| question of opinion. This is a fundamental truism in
| accounting. You cannot really teach how accounting allows you
| to express your opinion until you first understand which facts
| you have to work with.
| rahimnathwani wrote:
| If that's the case, it seems even more strange to have the
| first two parts of the first section repeatedly refer to
| 'profitability'.
|
| But I don't agree that you have to start with facts. I think
| you can start with the account equation, then go on to types
| of asset/liability/equity, and only then move on to concrete
| examples of transactions, and how they impact the balance
| sheet. And then you compare two snapshots of your balance
| sheet to show what profit is.
|
| You can do all this with concrete examples with virtually no
| risk (e.g. a lemonade stand where people pay cash before they
| are served, with almost no equipment to depreciate, no long-
| lived inventory etc.).
| teh_klev wrote:
| > Frank Wood's book "Business Accounting 1"
|
| Pretty sure that was the book I grudged most having to pay for
| when I was at college in 1986. I truly despised accounting ;)
|
| Three years later and I end up writing code to extend dbFlex
| and supporting Pegasus accounting software, go figure :)
| rahimnathwani wrote:
| I found it in 2005 or 2006, a year or two after my MBA, and a
| few months after I started studying for professional
| accountancy exams.
|
| I wish I'd found it earlier. It was more in-depth than the
| MBA material on financial reporting, and was presented more
| logically than the study guides I'd been using.
| tomcam wrote:
| I feel you. One of the classes I failed during my brief time
| in college was symbolic logic. But I was a music major so who
| cared. A few years later I taught myself to program, and of
| course C & assembly were filled with Boolean operations and
| truth tables...
| boppo1 wrote:
| Any advice for intermediate or advanced accounting? I studied
| finance in school, so I'm confident it the broad-strokes
| basics, but getting into deeper stuff is still intimidating.
| rahimnathwani wrote:
| I'm not sure of your starting point or your goals, but maybe:
|
| 1. Wood's Business Accounting 2
|
| 2. Some of the CFA study materials
|
| 3. Some of the 10kdiver threads:
| https://10kdiver.com/twitter-threads/
|
| 4. Books about financial fraud (that talk about incorrect
| ways to do accounting).
|
| 5. IFRS standards for your industry.
|
| 6. Googling 'Accounting for X', where X is something to do
| with your industry (e.g. 'virtual goods' or 'unpaid loan
| interest').
| rahimnathwani wrote:
| One more thing - I think it's enlightening to, at least
| once, build financial statements from a set of
| transactions, and then to dig back from the summary, to the
| original transactions, i.e.
|
| 1. Export all the transactions from your accounting
| software (from the start of time, to the end of last
| month).
|
| 2. Export the chart of accounts from your accounting
| software.
|
| 3. Load these into two separate tabs in Excel.
|
| 4. Add a column to #1, that maps the account to the
| relevant account type (e.g. 'assets') and statement (BS or
| P&L), using #2 as a lookup table.
|
| 5. Create a pivot table from #1, to create a balance sheet.
|
| 6. Create another pivot table from #1, but this time use
| time (month or year) as a dimension.
|
| 7. See if you can relate some of the balance sheet and P&L
| values from your spreadsheet, with the values on the
| statements produced by your accounting software.
|
| 8. Assuming they match, go back to the balance sheet pivot
| table and double-click on one of the non-zero values. You
| will see a history of every transaction that changed that
| account.
| boppo1 wrote:
| Thanks!
| ilhamsgenius wrote:
| mindslight wrote:
| I've never gotten the reconciliation of many of these "learn
| accounting" guides with what it takes to do actual accounting.
| They seem to make a big deal of covering very basic concepts that
| I would expect anybody with a programming background to pick up
| in under 10 minutes. The topics covered by these guides are less
| complex than most APIs.
|
| But when it comes time to do actual accounting, there is a whole
| host of much more complicated concepts - depreciation,
| capitalization, tax law, tax law, tax law, etc. And these never
| seem to be explained in any comprehensive way that would make me
| think I "know" accounting. Rather it's like the pedagogy is
| focused on basic math (which people call "accounting"), because
| you will only learn all of the details with experience.
|
| I even felt this same divide when I tried out Quickbooks, which I
| had thought was one of the gold standards for small business
| accounting. I was hoping for something that would walk me through
| how I needed to categorize expenses, track assets for
| depreciation, etc. Instead I was greeted with basically a
| spreadsheet replacement to automate problems I didn't have (eg
| printing checks at scale).
|
| Am I wildly off base here, or is there something else I'm
| missing?
|
| Taking a look at the site posted, it does seems to have many
| chapters with later ones covering advanced topics. But for
| instance taking a look at the chapter on depreciation, there are
| still additional details you'd actually need to do your taxes. I
| can understand how a simpler model helps someone learning this as
| their "first field", and they'll learn the richer model later.
| But from the perspective of someone who knows how to program, I'm
| still left wondering what value there is from reading general
| guides versus eg directly digging into what tax law forces you to
| calculate.
| dugmartin wrote:
| Quickbooks uses double entry accounting at its core but hides
| it as single entry accounting (like Quicken) by presenting most
| UI as entries into registers that represent assets (like the
| checkbox register or invoices) or liabilities (like bills or
| credit cards) while hiding owner's equity behind a year-end
| closing dialog.
|
| For example instead of having to learn what accounts to debit
| and credit when invoicing and then receiving payment from a
| customer you enter invoices in the invoice UI and receive
| payments in the receive payments and it takes care of the
| debits and credits for you.
|
| You can use Quickbooks to directly do double entry accounting
| by entering company journal entries. You (or your
| bookkeeper/accountant) will do that for more complex
| transactions that don't have a dedicated UI like, for example,
| partially returning a damage deposit to a tenant with the
| remainder covering repairs needed.
|
| I took a community college course in Accounting when I was
| thinking about enrolling in an MBA back in the '90s. You can
| learn the math in a really short amount of time - it is just
| basic addition/subtraction. It does take a while to get an
| intuitive feel as to why some things are debit normal and some
| are credit normal. Doing a bunch of "T" accounts will bake it
| into your brain. There are some good graphics here about that
| (first site I found while Googling) -
| https://corporatefinanceinstitute.com/resources/knowledge/ac...
| mindslight wrote:
| So these "T accounts" are exactly what I'm talking about.
| Reading that page it just seems to be a visual method of
| replacing negative signs, explained very verbosely. This
| seems it might have been a really valuable invention for
| someone in 1494. But in 2021 when we're comfortable with
| defining rich semantic models, it's just quaint. Like for
| instance it leaves out the date, whether the transaction has
| tax relevance, a link to its corresponding second entry, etc.
|
| I know this is apostasy, but even "double entry" itself feels
| this way to me, compared with say more freeform "tags". Like
| if you pay an expense for repairs, which is deductible for
| federal tax but not state tax, then it seems the only way to
| represent that expense in strict double book is to have 4
| accounts for (Repairs_Notax, Repairs_Fed, Repairs_State,
| Repairs_FedState). Whereas what I really want is for that
| transaction in possibly multiple expense accounts.
|
| I swear I'm asking this in good faith. Maybe my questions are
| ultimately born of the Lisp curse where computation has
| gotten so easy I'm eschewing what I perceive to be
| overdiligent focus on the mechanics. But if anywhere can
| examine this critically it's HN.
| PopAlongKid wrote:
| re: Quickbooks. It has now basically bifurcated into an online
| version and a desktop version, with somewhat different
| features. QB will in fact walk you through an optional setup
| interview to ask about what your general type of business is
| (service, retail, etc) and will create a default chart of
| accounts, which takes care of part of your need (how to
| categorize expenses). It becomes more complicated when the
| whole optional layer of "items" used to create invoices and
| bills gets added in. There is a fixed asset function, but QB is
| not really designed to calculate depreciation, rather it is
| normally handled with an annual journal entry based on output
| from the tax return.
|
| It does have some frequent traps for new users, who for example
| often don't understand "undeposited funds" and end up double-
| counting their revenue. Or, they don't realize that when they
| transfer money from say checking to savings, the entry made in
| one account register is automatically reflected in the other.
| mindslight wrote:
| I was using the offline version obviously. In a VM with no
| network access. I do recall some wizards for setting up
| accounts, but they weren't applicable to my business. It also
| didn't feel like such wizards would have changed the UI into
| operating at a higher level.
| marton_s wrote:
| I'm a software engineer who moved into freelance consulting a few
| years ago (I do back-ends and front-ends for mobile and web,
| nothing finance specific other than occasional credit card
| payment integrations). It's been a roller-coaster in many regards
| and one of the highlights is having learned a lot about
| bookkeeping, taxes, financial planning and everything that comes
| with running a small business in general. (Aspects which I
| initially despised but now I've accepted as necessary and doing
| them as routine.)
|
| During these years I started playing with the idea of training
| myself in basic/intermediate accounting and/or finance. The
| motivation is twofold: run my own business better (and maybe stop
| paying an accountant to do my taxes) and maybe work on software
| projects in finance (where I suspect there is good money to be
| made).
|
| I'd be interested hearing stories from fellow software engineers
| who did similar training!
| cheradenine_uk wrote:
| UK based, so YMMV.
|
| Moved from self-employed for the odd side gig, to UK LTD co, to
| VAT registered UK LTD co.
|
| The "business services mafia" will like to frighten you into
| believing you have to drop hundreds of PS on their services -
| plus PS120/yr for an accounts package, more for payroll,
| business banking, etc.
|
| Because your mind is too tiny to comprehend the ways of the
| priests. e.g: Don't ever ask a question in a business forum,
| you'll get swamped with the clergy telling you the question
| implies you're definitely going to prison because you're going
| to get it all wrong.
|
| Do not believe them.
|
| It is perfectly possible - perhaps even 'easy' - and if you
| understand the basics of double-entry accounting, all entirely
| learnable without too much effort. And best of all, you can do
| it almost for free!
|
| Don't drop hundreds per year on Xero, use
| https://www.quickfile.co.uk. Cost: PS0 (upsell on receipt
| scanning, but I don't use that). Does VAT, with electronic
| submission. I literally don't understand why you'd spend money
| on Xero - the extent to which it's advertised over here is
| insane; you're just paying for TV advertising.
|
| Payroll (and all the tax calculation): Free, for up to 3 users.
| https://www.shapepayroll.com
|
| Business banking: Tide. 20p/per transaction (no monthly fees!)
|
| The hardest parts are - discipline of entering the transactions
| and not letting them build up - in the UK, understanding
| capital allowances vs depreciation - when doing payroll how to
| split the payments into the correct accounts (shape does the
| sums, you have to account for it correctly) - Make sure you pay
| all your HMRC bills - Doing the year end as a micro-entity (the
| CT600 corporation tax return) is actually surprisingly easy,
| and amounts to putting numbers in about 6 boxes.
|
| By all means pay for all of this stuff if it isn't of interest
| to you. For me, as I intend my co to run long after I finish
| working, I didn't want to have annual fees for services that I
| really wouldn't be getting the use out of.
| xbryanx wrote:
| This sounds like every interaction I've had asking a question
| in a plumbing/electrician forum. Oh, if you're asking that
| question your definitely going to poison your entire house
| with sewer gas and/or burn the place down with that wiring.
| tomcam wrote:
| If you knew me you would understand why these warnings are
| necessary...
| sundarurfriend wrote:
| Reminds me of David Mitchell's bit/rant in Would I Lie To
| You: https://www.youtube.com/watch?v=mKc32jQIY0w (01:28
| if you're in a hurry).
| cheradenine_uk wrote:
| It's _exactly_ like that - and I've asked a fair few
| questions on DIY forums and the answer is, invariably, "you
| should hire someone to do that".
|
| It's even worse in the UK if you mention gas. If you so
| much as mention a boiler you'll be pounced on by the cartel
| inventing their own legislation.
| jsmith99 wrote:
| Does it let you file directly to Companies House? The forums
| imply you have to hire an accountant to do that.
| cheradenine_uk wrote:
| You can go 2 ways, neither of which are hard.
|
| You can file your accounts (which are trivial for a micro
| entity) directly with Companies house, or, when you do your
| CT600 corporation tax return (which is the 6 or so numbers)
| there's a checkbox marked "also file to companies house".
|
| You absolutely do not need an accountant.
|
| You also get a great deal of time (extra on your first
| year) between year-end and when you have to submit, so
| there is no panic.
| riccardomc wrote:
| I say: do it!
|
| I am also a freelance consultant but in the cloud infra space.
| I appreciate the freedom it gives me and the insight on the
| operations of running a business are invaluable.
|
| As a software engineering I always looked suspiciously at
| accounting and finance, but I have to admit I've been wrong. I
| discovered a practical and theoretical elegance that is very
| pleasing for someone like me.
|
| I ended up enrolling in an MBA because I wanted to learn more
| about the business side of things. I had a few courses about
| corporate finance, valuation and accounting which filled many
| gaps I had.
|
| I still don't trust myself running my own finances completely,
| so I do pay an accountant to take care of the details. But I am
| very happy I know financially what is what when deciding where
| to take my little business.
|
| Knowledge is power, especially when it comes to finance.
| m_ke wrote:
| Yeah I got stuck running a startup solo and would lose a ton of
| sleep stressing about any possible unknown unknowns on the
| accounting and legal side, reading through a few business law
| and accounting / bookkeeping books really helped ease that
| stress.
| goodlinks wrote:
| Imho anyone working on business applications could do with
| this. I get frustrated how naive so many software tools are
| regarding fincial controls and how developers dont know that so
| many data reconciliation issues were solved decades or
| centuries ago by accountants.
|
| Same goes for basic infrastructure and configuration knowledge
| to a certain extent:)
| augiemagic wrote:
| This sounds like something I'd be interested in learning more
| about. Do you have a couple examples of said data
| reconciliation issues, and the corresponding accounting
| approaches?
| jimnotgym wrote:
| An easy example. In a well designed database that
| represents an accounting ledger, debits are positive
| numbers credits are negative. With double entry accounting,
| if everything is correct the entire ledger sums to zero at
| all times. It is trivial therefore to know if an error
| crept in to your system, maybe something posted only half
| the entry before erroring (btw always post a complete
| double entry inside a database transaction).
| cheradenine_uk wrote:
| If you're interested, you can always check out the code
| to GNUcash;
|
| IIRC it has a SQL Schema that can be imported into most
| databases.
|
| https://wiki.gnucash.org/wiki/SQL
| augiemagic wrote:
| Ah that makes sense. Thanks!
| dugmartin wrote:
| You can also design your schema using unified ledger
| accounting
| (https://en.wikipedia.org/wiki/Unified_ledger_accounting)
| which captures both the transaction's debit and credit in
| a single row in a single table negating the need for a
| transaction.
| jimnotgym wrote:
| The problem comes with trying to quickly find the balance
| of sub-accounts. It is common to need to find the balance
| of all of the general ledger accounts repeatedly and
| quickly when preparing accounts, or having to find all
| customer balances to see who has paid. Once you have 10m
| rows of data (easily done at an sme) this gets very slow
| indeed. It is common to have a second table that records
| running balances or balances at period ends to speed this
| up. This is why transactions are important or you find
| the individual accounts of the sales ledger control don't
| add up to the total. Some systems have an 'audit' tool
| that adds them all back up from the general ledger.
| holri wrote:
| Not the OP. But in my experience, a lot of people do not
| know about double entry bookkeeping, which solves a lot of
| problems people have trying a home made excel bookkeeping.
| It is not more work to do, but you have to learn a little
| bit about the concepts. Once you know them, it seems
| incomprehensible that others make errors that have been
| solved hundreds of years ago.
| jermaustin1 wrote:
| > and maybe stop paying an accountant to do my taxes
|
| My mother was an accountant for years, I learned a lot of
| accounting, but there is a MASSIVE difference between knowing
| how to basically bookkeep and the tax code.
|
| I'm in the US - so might be easier in less tax-lobbied
| countries.
|
| When I started my second consulting firm (after closing down my
| first when I took a "real job"), I initially tried to go at it
| myself, but payroll is a complex process, so I decided to
| outsource that. Cost me $20/mo, but saved me hours of work.
| Then when the end of my first tax year hit, I started trying to
| figure out how to do my corporate taxes myself. Downloaded all
| of the tax forms I could find that I needed, and printed the
| couple hundred pages of information. 4 weeks into filling out
| the forms and 2 weeks before a filing deadline, I gave up. To
| the best of my knowledge I had underpaid my quarterly estimates
| by $30k.
|
| I reached out to a small business accountant (brother of a good
| friend), and for only $1200, he handled the 112 page tax
| return, found out I had only underpaid by less than $2000, also
| found a whole bunch of write offs I didn't even know to look
| for, and did a full reconciliation of my accounts for that.
|
| It was at this point that I decided I will always pay for
| professionals to do the part of this job that I am not
| proficient at. All of my various accounts-related services add
| up to less than 1% of my revenue, and if it were even 5 or 10%
| of my revenue, I'd probably still pay it, just to know it was
| done correctly.
| EvanAnderson wrote:
| I took the 101/201-level accounting classes at a local
| community college before my partners and I started our IT
| support contracting business in 2004. (For me, instructor led
| training is a preferable delivery vehicle, but the results
| might well be the same if I enjoyed self-education for this
| kind of thing.)
|
| The dividends paid by having basic accounting knowledge were
| twofold.
|
| It definitely helped me run the business better-- particularly
| when it came to working with the CPA who handles our taxes. It
| also helped me in communicating the operation of the business
| to the partners who have less of an accounting background. I've
| ended-up doing all the bookkeeping for the business and I think
| we've saved a ton of money versus hiring an accountant to do
| that basic work. (We still hire-out for tax-related work
| because I don't want to sink time into learning those
| intricacies.)
|
| The other major benefit, and arguably a larger one than the
| first, is giving me credibility when I talk to Customers'
| finance and accounting people. Properly using the terminology
| they're comfortable with to describe their business problems
| feels like it has helped me land relationships and projects.
| Obviously, I can't spin-up a "scratch universe" to test that
| hypothesis, but I do know that I've seen tech-heavy and
| accounting-light presentations by other vendors go over very
| badly with some of the same people.
|
| Finally, I'd argue bookkeeping and accounting is, arguably, the
| oldest "information technology" discipline in humanity. Much of
| IT springs from the history of bookkeeping becoming
| computerized ("automatic data processing"). I think knowing the
| history of IT, be from the dawn of computer science birthing
| from logic and mathematics, or the first practical applications
| of IT to human problems, is valuable to its practitioners.
| rrnn wrote:
| I come from a family of accountants. But when I first went to
| college I chose IT Management which included both IT and
| Accounting subjects. I've worked on the IT Side for about a
| decade.
|
| > The other major benefit, and arguably a larger one than the
| first, is giving me credibility when I talk to Customers'
| finance and accounting people.
|
| I also have benefited a lot from the accounting subjects I
| took in college have also been an advantage in my
| professional career as I can 'speak the language' of my
| workplace's financial department.
|
| > Finally, I'd argue bookkeeping and accounting is, arguably,
| the oldest "information technology" discipline in humanity.
| So much of the discipline springs from the history of
| bookkeeping becoming computerized ("automatic data
| processing"). It's a good background to working in IT to know
| about where it came from.
|
| - Definitely. The software used at my family's the accounting
| office was older than any other I had used. This year I
| helped them migrate from an MSDOS Fox Pro 2 application to a
| newer app.
|
| The MS-DOS It worked well, it is even still supported by the
| developer (!), but the work around required to make
| everything work in a Win 10 environment was too much of a
| hassle.
|
| It felt like doing digital archeology when opening files
| created between 1989 and 1994 to see how data was stored.
| Even this newer app still uses an older tech stack: Visual
| Fox Pro 9. Accounting software seems to run in an alternate
| timeline.
| pkrotich wrote:
| It's absolutely your best interest to learn at least the basics
| as business owner. I did so myself - I still do QuickBooks, but
| I have a cautionary tale.
|
| Learning account is great - it helps you to understand P&L and
| BS etc - but what you really need is managerial accounting
| knowledge. I made a mistake of thinking bookkeeping was
| accounting and ended up not doing good tax planning etc - let's
| just say I'm still paying for it. Painful lesson!
|
| I would highly recommend still keeping a CPA around - make sure
| they're truly into Managerial Accounting.
| mgkimsal wrote:
| I've never been 'afraid' of numbers/finance as such, but
| typically have operated on the smaller side of things enough
| where it hasn't been too much of a burden. I've had multiple
| financial folks in the family (accountants/cpas/cfos/etc) such
| that when I've had questions, I have trusted people I've turned
| to, which has been more than enough.
|
| About 10 years ago I brought on an outside accountant to handle
| my small business stuff. They do the final 'paperwork', but
| it's forced me to become a bit more diligent about financial
| housekeeping stuff - documenting purchases, keeping tax forms,
| etc. And I try to never let things go more than a few weeks
| before reviewing (primarily expenses). Part of the 'dread' of
| financial stuff was having to wade through a year's worth of
| paperwork. Keep ahead of that and working with an external
| accountant has made all this more of an annoyance than anything
| else.
| revskill wrote:
| All of this could/should be replaced with coding.
|
| Why not illustrating concepts by some coding with a database ?
|
| It sucks, when those finance specialists have no idea on coding
| to teach others, which left a hole on those sucking ERP software
| to fill (but failed).
|
| Or, if you can't teach using programming, you still don't get it.
___________________________________________________________________
(page generated 2021-12-20 23:00 UTC)