Mention the word ‘Accounting’ to a high school student and many will turn a paler shade of grey and want to run a mile. Of course, there are the few lucky ones, like me, who get excited because numbers are their best friend and they’ve managed to manoeuvre their way through the accounting ‘mysteries’ with skill and mastery. I find it incredibly sad that Accounting is so misunderstood, as it actually is an incredibly wonderful and useful language to learn. I hope to debunk some of those myths here.
Myth #1: Accounting is hard
It really isn’t. Although it can often be experienced as difficult by many, this is usually because it hasn’t been introduced correctly. In fact, most teachers probably don’t even realise how simple the underlying principle of double-entry is – it took me about fifteen years to figure out the fact that debits and credits arise from the two sides of the accounting equation, then another fifteen for the penny to really drop when I finally realised that ‘debit’ and ‘credit’ are simply derivations of the Italian and / or Latin for ‘own / owed to me’ (debere / debitum) and ‘owed to others’ (credere / creditum). If only someone had shown this to me years ago, as I’ve just done in a short video for Accounting students.
Together with a good understanding that the purpose of Accounting is reporting to stakeholders by preparing financial statements based on the principles of the International Financial Reporting Standards (IFRS), all Accounting problems are easily solvable.
Myth #2: Accounting is boring
Yes, recording endless transactions in journals is boring, BUT this is bookkeeping, not Accounting. Bookkeeping in practice is usually computerised and relatively simple using Quickbooks, Xero or similar. Accounting involves the preparation of financial statements according to IFRS principles. Determining the underlying reasons for treating transactions in different ways requires analytical and logical thought.
Analysing financial statements can be likened to colouring a ‘paint-by-number’ picture – as different ratios and calculations are applied to the numbers, a hidden picture of the actual workings of the business emerges. Zombie companies are uncovered and financial mismanagement and shenanigans are exposed. Edcon’s demise could easily be predicted by looking at its equity in the financial statements as early as 2012. Steinhoff’s disreputable financials with negative equity figures for the past few years are a large sign, ‘beware!’ Likewise, clever strategies for business success can be identified and learnt from, and companies ripe for profitable investments discovered.
Myth #3: There is only one correct way to record transactions
Not at all. In fact, as long as you have the correct end destination as your goal i.e. fair presentation of performance and financial position according to IFRS, how you get there is completely up to you. This myth is probably the reason many universities sometimes prefer students with no Accounting background, so that they don’t come in with only one method in mind and are unable to deviate and adapt to alternative approaches that are used. Much like meeting a friend on holiday does not require you both to travel the same path to get there, every syllabus or curriculum uses a different approach for the processing of transactions.
CAPS and IEB use the perpetual inventory system with Debtors’ and Creditors’ control accounts as part of double-entry and subsidiary ledgers as extra. Cambridge school accounting uses the periodic inventory system with a cash book as part of the general ledger and individual supplier and customer accounts as part of double-entry, with control accounts introduced as extra. Every single university in South Africa uses a slightly different approach and terminology, and business practice uses computerised packages that are each different in how transactions are recorded and processed. Students who are unaware of the variety of options can become ridiculously confused, but if they are exposed to different options, they are able to hone in on the important Accounting concepts based on IFRS principles without being distracted by the variety of approaches.
Myth #4: You don’t need Accounting at school to study a BCom / BAccSci / BBusSci
Technically, you don’t. Students are accepted for these courses at most South African universities with just Maths and English as requirements. However, students who have not been exposed to Accounting at school are severely disadvantaged. Yes, school Accounting may be covered in the first few weeks of a business degree. Enough said. The concepts at university are more complex, and if the basics are not understood in the excitement of a new student life with all its distractions, most students who did not take the subject at school struggle and often have to repeat. Most of my first year extra lessons are to students who did not take Accounting at school – in all my years of teaching I have only had one first-year student who did Accounting at school and still needed help in first year.
Research into the correlation between taking Accounting at school and success in first year Financial Accounting is varied and conclusions differ, but seem to support my personal hypothesis that if students are made aware of the flexibility of possible approaches, prior exposure is definitely beneficial.
Moral of the story? Encourage any child interested in studying a business degree to take Accounting at school … with a varied approach, logical explanations and the end goal of financial statements prepared according to IFRS principles in mind, of course!
- Those parties with an interest in the continued success of the business, and who can affect / be affected by the actions of the business.
- Yes, this is an actual term relating to businesses that are surviving on borrowed money, paying interest but unable to make the repayments.
- This research shows that statistical data indicated that Accounting taken at school contributed significantly more to success in the Accounting module at Stellenbosch University.
- This research showed top performers were those who took Accounting at school, had Afrikaans as a home language and worked hard.
- This research showed a positive correlation between Accounting taken at school and first year success if the approach used was the same.