Accounting: It's Taxing but Worth the Effort

By Veigle, Anne | The Washington Times (Washington, DC), February 2, 1999 | Go to article overview

Accounting: It's Taxing but Worth the Effort


Veigle, Anne, The Washington Times (Washington, DC)


Hollywood glamorizes doctors and cops, but the lowly accountant is typically cast as a pasty-faced weasel wearing thick glasses. Accountants don't laugh, have no creativity and enjoy spending hours hunched over numbers.

But they are the heroes during tax season, as many a panicked taxpayer can attest.

A number of my friends worship accountants, thinking nothing of paying them to do tax returns that are not terribly complicated. They view the cost for such services as akin to paying a mechanic for car repairs they have neither the skill nor interest in doing.

Considering the complexity of modern auto repairs, it probably is not worth learning how to do them. But understanding basic accounting is well worth the study time. Not only can it help organize a household budget, it also enables one to more intelligently evaluate the health of mutual funds and the companies in which they invest.

Accounting uses its own jargon that can be daunting: LIFOs, FIFOs and ACRS, for starters. Income statements, costs of goods made, operating expenses - these are not terms of everyday discourse. Ever look at an annual report, school board budget or public stock offering and wonder what is hiding in the neatly printed numbers?

With a little determination, it is possible to unearth these secrets, according to Darrell Mullis and Judith Orloff, authors of "The Accounting Game," a book that claims to provide a college semester's worth of accounting education.

Their book starts with the following quiz to gauge one's accounting acumen:

* Which one of the following items is not found on a balance sheet?

a) cash b) gross profits c) assets d) liabilities

* Which accounting system most accurately reflects profitability?

a) cash

b) flow of fund accounting

c) accrual accounting

* An account receivable is:

a) an asset

b) owner's equity

c) a liability

* Which of the following is most important to the daily operations of a business?

a) assets

b) retained earnings

c) cash

* When people speak about the bottom line, they are referring to:

a) net profit

b) gross margin

c) gross profit

* A prepaid expense is:

a) an asset

b) owner's equity

c) a liability

* Is LIFO/FIFO a method of:

a) inventory evaluation

b) profit ratio

c) financing

* Which would you find on an income statement?

a) expense

b) fixed asset

c) liability

* Which of the following expenses does not affect your cash position in running a business:

a) lease expense

b) advertising expense

c) depreciation expense

* Which of the following is a basic accounting equation? …

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