Accounting is all about numbers, right?

Or alternatively “Accounting is not for me because I don’t like numbers.” These are the most common questions/comments that I hear when people find out that I am doing a Masters degree in Accounting. It is a very common assumption that accountants are the number people, great at math and love structure in their work, wallets and private life, thus accounting is a boring and number-driven profession.

But this is not the case! Well more like its an exaggeration. It is true that accountants use numbers, and it’s true that structure and form both play a major role in this profession, but it is not as mathematical as you would think. Numbers are a tool that accountants use to measure value, and value is a intangible concept, much like “love” or “fun”.

Now comes my favorite example to illustrate my point. Imagine you just bought an apple orchard. It cost you $2,000 but it was your life long dream and you are very content with your purchase. At this point how much is the orchard worth? $2,000 you would probably say. A couple of months are passing by and your orchard starts to bear fruit, how much is the orchard worth now? $2,000? But if you sell the fruits is has you could earn $300, so wouldn’t the orchard’s value be $2300? But wait, are you sure you can sell the apples for $300, not more, not less? How sure? Imagine that an orchard next door and similar to yours was just sold for $5,000. Does that mean your orchard is worth $5,000 now? So as the example illustrated the concept of value is not as defined as one might have initially thought.

It is true that numbers play an important role in accounting. It is a tool for an accountant to express their judgment, they must be proficient and accurate in using it, but it is still a tool, not the essence of the profession. I would argue that accounting is overwhelmingly a science about choice. What accountants aim to do is to document how much a particular item is worth, but in doing so they must identify and select appropriate accounting methods. In some cases no choice is given and accounting standards prescribe how to measure value, but in the vast majority of situations it is much more important to know how the accountant makes a choice, rather than how accurately he/she can do arithmetics.

Source: cartoonstock.com

Alex