Article II - August, 2006
There are five important reasons to learn the basics of the language of accounting.
- Maintain control of your money: As we saw in last month’s article, Maureen the jeweler was lucky because the bookkeeper she found was trustworthy. Not everyone is as lucky. An equally common scenario looks like this: A small medical practice consisting of two psychiatrists hire an office manager responsible for their bookkeeping. She appears competent and handles all of the day to day business. Unfortunately, she is competent but dishonest. After embezzling thousands of dollars from the medical corporation and filing payroll tax returns in the wastebasket, she finally slips up and is caught and eventually prosecuted. The two doctors feel that they should have been able to spot her character flaws. But while they may have been excellent psychiatrists, they did not know the language of accounting and lost control of their money to someone they trusted. To know what a Balance Sheet is and to review it regularly is important for principals who run a business, even if they do not do the day to day bookkeeping. In fact it is particularly important if they do not do the day to day bookkeeping.
