Should I learn accounting?
March 18, 2019 12:07 PM
Can a layperson learn accounting to the point where they can truly understand it? And is it a good use of one's time?
Husband and I own a successful small business (several employees and growing) and a number of rentals. Our accounting is simple enough that I do it all myself and we have a trusted accountant that does our taxes. But as our business grows, I feel more and more that I am making uneducated financial decisions with god only knows what tax or future-sale-of-business implications.
Is it a good idea for me to dive deep into accounting and taxes? On one hand, I hate-hate-hate having daily interactions with something I don't fully understand, I am a life-long learner, a former software engineer who enjoys understanding complex systems. On the other hand if it's going to take 5 years of intense study, or worse I will never learn enough to feel truly knowledgeable, then I'd rather spend my time elsewhere.
As one tiny example, we recently had to consider whether to purchase a company car. One option was a $100k electric SUV, too expensive for us as-is. I tried to get a simple answer on what the car would cost after utilizing a number of available tax deductions, our accountant was helpful but at the same time it was a whole lot of "it depends" and if we wanted a more definitive answer we would have had to spend hundreds if not thousands of dollars running various tax simulations. We ended up crossing our fingers and buying the car which turned out to be a great decision - that $100k ended up being $50k after all the deductions and incentives, not to mention fuel savings. But I would have liked to know this upfront, fingers-crossed makes me really uncomfortable!
So... yay or nay? I would especially appreciate any CPA opinions, and if you think this is worth my while, what's a good long-term approach to learning?
Thank you in advance for your answers.
Husband and I own a successful small business (several employees and growing) and a number of rentals. Our accounting is simple enough that I do it all myself and we have a trusted accountant that does our taxes. But as our business grows, I feel more and more that I am making uneducated financial decisions with god only knows what tax or future-sale-of-business implications.
Is it a good idea for me to dive deep into accounting and taxes? On one hand, I hate-hate-hate having daily interactions with something I don't fully understand, I am a life-long learner, a former software engineer who enjoys understanding complex systems. On the other hand if it's going to take 5 years of intense study, or worse I will never learn enough to feel truly knowledgeable, then I'd rather spend my time elsewhere.
As one tiny example, we recently had to consider whether to purchase a company car. One option was a $100k electric SUV, too expensive for us as-is. I tried to get a simple answer on what the car would cost after utilizing a number of available tax deductions, our accountant was helpful but at the same time it was a whole lot of "it depends" and if we wanted a more definitive answer we would have had to spend hundreds if not thousands of dollars running various tax simulations. We ended up crossing our fingers and buying the car which turned out to be a great decision - that $100k ended up being $50k after all the deductions and incentives, not to mention fuel savings. But I would have liked to know this upfront, fingers-crossed makes me really uncomfortable!
So... yay or nay? I would especially appreciate any CPA opinions, and if you think this is worth my while, what's a good long-term approach to learning?
Thank you in advance for your answers.
For most people the answer is 'no', but for you the answer is heck yes you should learn accounting! Accounting is a huge expense for a small business, you have lots of real capital tied up in accounting decisions to the extent that it basically rules your business.
posted by The_Vegetables at 12:32 PM on March 18, 2019
posted by The_Vegetables at 12:32 PM on March 18, 2019
I am an accountant, and have been for 30 years. Way back when I learned the basics in a college class. The concepts of income and expense, net income, retained earnings, and the like. Then there were the more advanced concepts of allowances, prepayment, depreciation, and taxes. These ideas made sense, and were straight forward. Except for tax. Instructors tended to encourage us to gather our data and present it to a qualified tax guy, once we were in the real world. "Code Heads", as one guy referred to them, learned the thousand page tax book and absorbed the updates and court decisions. And liked it, I suppose.
In any case, if you appreciate that numbers make more sense than people, you may do well as an accountant. You don't need to go the CPA route, as that requires much more work and study, and the CPA's need underlings to do the routine work. As far as your own company, if you don't understand what your CPA and tax guy are doing for you, and what the results and financial statements really mean, you may find yourself in a situation where you just don't know how things went wrong.
As far as that electric SUV is concerned, you can spread the cost over the allowed number of years, book any ongoing tax allowances, and consider the reduced operating costs, and then compare to the alternatives. When spread out over time, and with reasonable assumptions, the decision becomes more clear.
posted by Midnight Skulker at 12:33 PM on March 18, 2019
In any case, if you appreciate that numbers make more sense than people, you may do well as an accountant. You don't need to go the CPA route, as that requires much more work and study, and the CPA's need underlings to do the routine work. As far as your own company, if you don't understand what your CPA and tax guy are doing for you, and what the results and financial statements really mean, you may find yourself in a situation where you just don't know how things went wrong.
As far as that electric SUV is concerned, you can spread the cost over the allowed number of years, book any ongoing tax allowances, and consider the reduced operating costs, and then compare to the alternatives. When spread out over time, and with reasonable assumptions, the decision becomes more clear.
posted by Midnight Skulker at 12:33 PM on March 18, 2019
I am an accountant but a financial auditor, not a tax advisor. My reading of the question was that you have gotten to grips with basic bookkeeping and that this isn’t really about accountancy but about tax law. If I’m wrong stop reading!
Tax law tends to be complex and very location specific. You can probably get a reasonable grasp of some tax topics with a reasonable amount of effort but the reason why your accountant can’t just give you an ad hoc, definitive response is because there may not be one. The most appropriate course of action will often be determined by thinking through a number of scenarios and understanding the different options for each. That depends on detailed knowledge of the the transaction/contract (options), the rules and experience because experience is how you learn what the rules really mean and how the tax authorities interpret the rules. It is easy enough to read the law, much more difficult to bring it to bear on real life. And it would be difficult to get enough exposure to a range of real life application without being a tax professional. So you could probably learn the key considerations around one or a few topics. But you’ll have a range of different topics you’ll want to cover. So my feeling is that it would be difficult to get to where you want to be as lay person.
posted by koahiatamadl at 12:40 PM on March 18, 2019
Tax law tends to be complex and very location specific. You can probably get a reasonable grasp of some tax topics with a reasonable amount of effort but the reason why your accountant can’t just give you an ad hoc, definitive response is because there may not be one. The most appropriate course of action will often be determined by thinking through a number of scenarios and understanding the different options for each. That depends on detailed knowledge of the the transaction/contract (options), the rules and experience because experience is how you learn what the rules really mean and how the tax authorities interpret the rules. It is easy enough to read the law, much more difficult to bring it to bear on real life. And it would be difficult to get enough exposure to a range of real life application without being a tax professional. So you could probably learn the key considerations around one or a few topics. But you’ll have a range of different topics you’ll want to cover. So my feeling is that it would be difficult to get to where you want to be as lay person.
posted by koahiatamadl at 12:40 PM on March 18, 2019
My feeling is that if more business people understood financial management (which is larger than just accounting) their businesses would be better off. So yes, you should look into some financial management classes.
posted by winna at 12:43 PM on March 18, 2019
posted by winna at 12:43 PM on March 18, 2019
I have done basic accounting for years and I work in the taxing realm; I have also owned my own business. Yes, learning accounting is absolutely worthwhile, although for your own purposes / business it may not make sense to deep dive into cost accounting or other 3rd/4th year classes.
My personal boundary even given my qualifications is not to do my own taxes, not necessarily because tax law is complicated but more so because it changes so often and if you're not keeping abreast of those changes professionally then it can be easy to miss something.
That being said there's no harm in taking a class next Fall from H&R Block and seeing if you'd like to go any farther with it. Anecdote: my family own a business and my aunt decided to learn to do their taxes. That led to her working for Block for a few years, and eventually opening her own tax prep business, which she ran out of her house. It provided an extra level of security when things were slow with the business.
posted by vignettist at 1:16 PM on March 18, 2019
My personal boundary even given my qualifications is not to do my own taxes, not necessarily because tax law is complicated but more so because it changes so often and if you're not keeping abreast of those changes professionally then it can be easy to miss something.
That being said there's no harm in taking a class next Fall from H&R Block and seeing if you'd like to go any farther with it. Anecdote: my family own a business and my aunt decided to learn to do their taxes. That led to her working for Block for a few years, and eventually opening her own tax prep business, which she ran out of her house. It provided an extra level of security when things were slow with the business.
posted by vignettist at 1:16 PM on March 18, 2019
Yes, although it might not be accounting so much as finance and money. I’m a non-financial manager in technology but some of what I do bumps up against business strategy. Taking a 3-day American Management Association course in finance was one of the best things for my career in the long run. I can read a balance sheet, could once describe the difference between double entry and accrual accounting, and can mumble about “Sox compliance” like a much more financial manager.
posted by chesty_a_arthur at 1:20 PM on March 18, 2019
posted by chesty_a_arthur at 1:20 PM on March 18, 2019
I owned a small business. I had a string of crappy accountants. Not the best way to get a handle on bookkeeping; I did finally have a great accountant. This was pre-affordable personal computers, so I used checks with a carbon stripe and a giant ledger. And did my own employment tax filing, earning the IRS my undying fear, distrust and dislike. Understanding bookkeeping gave me a better sense of where the money went. Your Local Adult Education organization will have classes.
posted by theora55 at 3:08 PM on March 18, 2019
posted by theora55 at 3:08 PM on March 18, 2019
Brian Bushee’s free course on Coursera is a great introduction. He is one of the most award-winning professors at Wharton, and the course is great and highly rated.
posted by blahblahblah at 9:49 PM on March 18, 2019
posted by blahblahblah at 9:49 PM on March 18, 2019
If Duff from Guns N Roses can learn accounting so that he would understand the financial statements he received as a shareholder in Guns N Roses Inc...
Not a slam on Duff. After reading his and Slash's books I think Duff was definitely the smart one in GnR
posted by COD at 6:02 PM on March 19, 2019
Not a slam on Duff. After reading his and Slash's books I think Duff was definitely the smart one in GnR
posted by COD at 6:02 PM on March 19, 2019
This thread is closed to new comments.
(When I took an adult ed class in welding, I was amazed that people had been taking the same class for years. There, seriously, were boats people were working on...)
posted by MountainDaisy at 12:22 PM on March 18, 2019