Updated: Jan 3, 2021
If you really want to know how a business works, a solid grasp of accounting is essential. Understanding the basics of accounting is crucial when growing your business and analysing the financial impact of different situations is key when making important decisions. For these reasons, having an awareness of accounting principles will prove to be a huge advantage in helping to drive your business forward.
Understandably, there may be many reasons you have not dived into the world of accounting:
1. Accounting is Boring
This is actually not true, but unfortunately, accounting has acquired an unfair reputation of being dull and tedious. Most people think of accounting as numbers and spreadsheets; however, a solid grasp of accounting can help to accurately analyse a company and predict its future.
2. No Time
Lack of time is always a challenge, and sometimes you have to prioritise what you want to learn.
If accounting is not a core part of your job, you may decide there are more important areas to dedicate your time. On average, an accounting qualification such as CIMA will take four years to complete. So, you may think you need to spend a large chunk of time studying accounting just to get a grasp of the basics.
3. Accounting is Complicated
There is no denying that accounting can be very complicated. That being said, the fundamentals of management accounting are easily within everyone's grasp and is really all you need to know for day to day business (unless, of course, your job is in accounting).
So, What Should You Do Next?
An understanding of finance is well within your reach and investing time into learning the fundamentals is effort that is very well spent. However, you might be wondering, how can I learn it?
This is where I will introduce you to the best beginner’s accounting book I have ever come across – “The Accounting Game” by Darrell Mullis and Judith Orloff.
Most introductory accounting books fall into one of two categories. They are either too basic and only scratch the surface, or they are complicated and go into too much detail. Basic books may teach you all the essential principles, but fail to put all the concepts together. By the end of the book, you may end you end up having a longer list of questions than when you started. On the other hand, the complicated books go into far too much depth and complexity, which may make you very confused and cause you to give up.
The Accounting Game
The Accounting Game provides the perfect balance of detail, practical examples and explanations. It is written in the form of a story about a boy starting a business selling lemonade to his neighbours.
His business progressively expands as he takes on staff, receives bank loans, buys and sells on credit, markets his company and even pays taxes. As this is his first business, he is learning everything as he goes along, and as a reader, you accompany him on this journey.
The books’ biggest strength is that the authors are fully aware of the areas that confuse most individuals in non-financial careers. Each of these areas is slowly built up to so as you cover them, you hardly notice that a new principle has been introduced.
Topics covered in the book include:
Depreciation and amortisation
The great thing is that throughout the book, there are practice exercises you need to complete. This really helps to make sure you understand each point and helps you to cement them in your brain.
I can't recommend this book enough. It is fun, interesting and most importantly, effective. It takes a dry subject and makes it interesting by taking you through the full lifecycle of a business and steadily introducing you to new concepts. This is the first accounting book I have ever finished reading (and I've tried reading quite a few), so that is a testament to how good this book is. You can easily read it from cover to cover in just a few days and it may well be the type of book you occasionally refer back to.
I would suggest buying the paperback version of this book rather than the Kindle version. There are spaces in the book for you to write your answers, so if you have a physical copy of the book, it will make it much easier to fill out the answers to these exercises.
The book doesn't, of course, cover every area of accounting. However, it does give you such a good foundation that should you need to dive deeper into any particular area of accounting, it shouldn't cause you much of a problem.