Watch this 4-minute video and answer the questions below:

1. According to the man, what is accounting?
2. How many specific accounting terms were mentioned? How many did you know?
3. Why did you choose to major in accounting?

Transcript:

Accounting is really a subject worth learning. When I was a younger man, I took an introductory accounting class and decided that maybe accounting was a really good of a major for me, even though I didn’t necessarily wanted to become an accountant.

I’m kind of a type A personality. I’m the kind of person that likes to be in-charge, likes to have responsibility, be accountable, call the shots. And I saw myself, as potentially in the future, maybe owning my own business, or being the CEO of a major corporation. And when I took that introductory accounting class, my first accounting course, I discovered that accounting was the language of business. And it’s a language of business because its sole purpose is to communicate information to business decision-makers. Well, that’s what I wanted to be. I wanted to be a business decision-maker. And probably the most important tool to anyone who is making business decisions is information. And it’s very useful to know where information comes from, what it means, and how to use it to make better business decisions. And that’s in essence, what accounting is all about.

And even if you choose not to go into business, you’re going to be forced to make business decisions throughout your life. For example, you may go down to buy a car, and the salesperson may introduce or suggest, you should really lease the car. Well, what is a lease? And they give you some explanations, but you’re not sure you understand. Maybe they even give you a lease contract. You start reading it, and you realized, “I don’t really understand this language. I’m not really sure which is better, to buy a car or to lease it.” In that case, you may end up taking the recommendation of the salesperson, who’s probably more interested in getting a big commission than what’s best for you.

In addition, you’re probably going to buy a home at some point. And you’re going to need financing for that home. So what is it going to be? Should you get a 30-year fully amortizing? Fixed-rate mortgage? Or what if some of my options, or do I even have any clue what you’re talking about? Can you speak the language of business to make good decisions which is relative to the purchase of a home?

Or for example, maybe you’re saving for retirement, or will be saving for retirement. You’ll have an IRA account, or a 401K plan, and you’ll be making contributions for your future retirement and somebody’s going to come and ask you at some point in time: How do you want those funds invested? Do you want them invested in stocks or bonds? Or some kind of a mutual fund? Or maybe you want them invested in some commodities or the like?

Well, do you speak the language of business? Do you know what stocks are? Do you know what bonds are? Do you know the risks and potential advantages are of those various investments? Do you know what a mutual fund is? How to invest in those kinds of things?

If you don’t know those things, if you can’t speak the basic language of business, then you’re going to find yourself depending upon the opinions of others. Maybe you’ll say to your money manager: you just make the decision for me. There’s great risk in letting other people make decisions about your financial future. You ought to speak at least a little bit of the language, so you can communicate and participate to some extent in those decisions, and monitor their progress.

Now you see, you’re going to make business decisions throughout your life, and you’re going to be listening to the news, and hearing about corporate profits, and other earnings per share, other language. And will you understand it?

Understand the basic of accounting will help you not only making better personal decisions but help you be a more educated person in our world today.

I hope you like this introduction to accounting.

Answers:

1. Accounting is the language of business. Understanding even the basic of accounting will help you make better decisions.
2. Lease/IRA Account/Stock/Bond/Mutual Fund/Amortize/Mortgage/Earnings per share…
3. Depends on each person.