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Accounting for Non-Accountants: The Fast and Easy Way to Learn the Basics Paperback – June 1, 2006

ISBN-13: 978-1402206573 ISBN-10: 1402206577 Edition: 0th

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Product Details

  • Paperback: 240 pages
  • Publisher: Sourcebooks (June 1, 2006)
  • Language: English
  • ISBN-10: 1402206577
  • ISBN-13: 978-1402206573
  • Product Dimensions: 7 x 0.6 x 9 inches
  • Shipping Weight: 14.4 ounces
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (22 customer reviews)
  • Amazon Best Sellers Rank: #123,785 in Books (See Top 100 in Books)

Editorial Reviews

About the Author

Wayne Label has an MBA and PhD from UCLA. He has worked for the American Institute of of Certified Public Accountants, as well as various other academic posts.

Excerpt. © Reprinted by permission. All rights reserved.

The Basics of Accounting

What Is Accounting?
The purpose of accounting is to provide information that will help you make correct financial decisions. Your accountant's job is to give you the information you need to run your business as efficiently as possible while maximizing profits and keeping costs low.

QUICK Tip
Finding an Accountant: Hiring a professional and ethical accountant to aid in your business operations can be critical to the success of your company. Meet with a few accountants before making a final choice so that you know your options and can select one whose experience and work style will be best suited to your needs and the needs of your business. Local chapters of your state societies of CPAs offer referral services that can help with this.

Accounting plays a role in businesses of all sizes. Your kids' lemonade stand, a one-person business, and a multinational corporation all use the same basic accounting principles. Accounting is legislated; it affects your taxes; even the president plays a role in how accounting affects you. The list goes on and on.

Accounting is the language of business. It is the process of recording, classifying, and summarizing economic events through certain documents or financial statements. Like any other language, accounting has its own terms and rules. To understand how to interpret and use the information accounting provides, you must first understand this language. Understanding the basic concepts of accounting is essential to success in
business.

TYPES OF INFORMATION PROVIDED BY ACCOUNTANTS
• Information prepared exclusively by people within a company (managers, employees, or owners) for their own use.

• Financial information required by various government agencies such as the Internal Revenue Service (IRS), Securities and Exchange Commission (SEC), and the Federal Trade Commission (FTC).

• General information about companies provided to people outside the firm such as investors, creditors, and labor unions.

Accounting and Bookkeeping
Bookkeeping procedures and bookkeepers record and keep track of the business transactions that are later used to generate financial statements. Most bookkeeping procedures have been systematized, and, in many cases, can be handled by computer programs. Bookkeeping is a very important part of the accounting process, but it is just the beginning. There is currently no certification required to become a bookkeeper in the United States.

Accounting is the process of preparing and analyzing financial statements based on the transactions recorded through the bookkeeping process. Accountants are usually professionals who have completed at least a bachelor's degree in accounting, and often have passed a professional examination, like the Certified Public Accountant Examination, the Certified Management Accountant Examination, or the Certified Fraud Auditor Examination.

Accounting goes beyond bookkeeping and the recording of economic information to include the summarizing and reporting of this information in a way that is meant to drive decision making within a business.

Who Uses Accounting Information?
In the world of business, accounting plays an important role to aid in making critical decisions. The more complex the decision, the more detailed the information must be. Individuals and companies need different kinds of information to make their business decisions.

Let's start with you as an individual. Why would you be interested in accounting? Accounting knowledge can help you with investing in the stock market, applying for a home loan, evaluating a potential job, balancing a checkbook, and starting a personal savings plan, among other things.

Managers within a business also use accounting information daily to
make decisions, although most of these managers are not accountants.

AREAS IN WHICH MANAGERS USE ACCOUNTING INFORMATION
• Marketing (Which line of goods should the company emphasize?)

• Production (Should the company produce its goods in the United States or open a new plant in Mexico?)

• Research and Development (How much money should be set aside for new product development?)

• Sales (Should the company expand the advertising budget and take money away from some other part of the marketing budget?)

Without the proper accounting information these types of decisions would be very difficult, if not impossible, to make.

Bankers continually use accounting information. They are in the business of taking care of your money and making money with your money, so they absolutely must make good decisions. Accounting is fundamental to their decision-making process.

AREAS IN WHICH BANKERS USE ACCOUNTING INFORMATION
• Granting loans to individuals and companies
• Investing clients' money
• Setting interest rates
• Meeting federal regulations for protecting your money

Government agencies such as the Internal Revenue Service (IRS), the Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC), and the Bureau of Alcohol, Tobacco, and Firearms (ATF) base their regulation enforcement and compliance on the accounting information they receive.

Accountability in Accounting
A business's financial statements can also be of great interest to other members of the local or national community. Labor groups might be interested in what impact management's financial decisions have on their unions and other employees. Local communities have an interest in how a business's financial decisions (for example, layoffs or plant closings) will impact their citizens.

As the economy becomes more complex, so do the transactions within a business, and the process of reporting them to various users and making them understandable becomes more complex as well. A solid knowledge of accounting is helpful to individuals, managers, and business owners who are making their decisions based on the information accounting documents provide.

Financial Statements
Accountants supply information to people both inside and outside the firm by issuing formal reports that are called financial statements.

The financial statements are usually issued at least once a year. In many cases they are issued quarterly or more often where necessary. A set of rules, called Generally Accepted Accounting Principles, govern the preparation of the financial statements. Generally Accepted Accounting Principles (GAAP) has been defined as a set of objectives, conventions, and principles to govern the preparation and presentation of financial statements. These rules can be found in volumes of documents issued by the American Institute of Certified Public Accountants (AICPA), the Financial Accounting Standards Board (FASB), the Internal Revenue Service (IRS), the Securities and Exchange Commission (SEC), and other regulatory bodies.

The Basic Financial Statements
The basic financial statements include the Balance Sheet, the Income Statement, the Statement of Cash Flows, and the Statement of Retained Earnings. We will look at these in depth in the following chapters and see how they all interact with each other. As we discuss these financial statements, you will see they are not as scary as you might have thought they would be. Many of the concepts will already be familiar to you.

The Balance Sheet is the statement that presents the Assets of the company (those items owned by the company) and the Liabilities (those items owed to others by the company).

The Income Statement shows all of the Revenues of the company less the Expenses, to arrive at the "bottom line," the Net Income.

The Statement of Cash Flows shows how much cash we started the period with, what additions and subtractions were made during the period, and how much cash we have left over at the end of the period.

Customer Reviews

Very easy to grasp the GAAP...
J. Rose
I have worked in accounting for over 25 years and this is the best book that I have seen to help people with the basics of accounting.
Cheryl K. Henderson
This book is good for people who want to look into starting their own business.
Noah Glaser

Most Helpful Customer Reviews

8 of 8 people found the following review helpful By Cheryl K. Henderson on August 26, 2006
Format: Paperback
This book is excellent for non-accountants. The chapters are well constructed with examples that are very easy to follow. I have worked in accounting for over 25 years and this is the best book that I have seen to help people with the basics of accounting.

I have bought several copies for my friends (non-accountants) as gifts and they all love the book. I highly recommend this book to anyone that does not have an accounting background. If accounting scares you then this book will help relieve your anxieties.
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19 of 24 people found the following review helpful By Deduction on September 27, 2008
Format: Paperback
This book isn't for beginners, or even people who know the basics. If you're an absolute beginner, not much of this book will make sense. Some of it was helpful (about 30% of it), but overall i found it frustrating. And since i want to master accounting i will have to find another book on amazon (for a beginner, this time). Then maybe after that book i can come back and read this one and i will understand it. But you cant walk before you can crawl. And at the moment, a book teaching me how to walk is no good to me, i need one that will teach me how to crawl first.

True, the book title is not "Absolute beginners guide to accounting". So it may be harsh to rate it at 1 star. But if the author isn't targeting beginners, then this review should make no difference to book sales because i am only speaking to beginners (from a beginners point of view). However, the book title and sub heading does lead you to think it's going to teach you the basics... and that it is the easy way to learn them. (I.e. for beginners?)

I bought this book because of how many positive reviews are here. I did notice there was one negative review for the book before i bought it which said "not for beginners" but i figured the reviewer might have just been a big dummy, since so many others rated the book 5 stars. But, now, looking back over all the positive, five star reviews, i can see that most of them had some prior experience with accounting, and a few even say "it isn't for an absolute beginner". I should have listened. So this review applies to beginners only.

This would be good book if you just need a refresher course if you've learned a fair bit about accounting before and just need a reminder.
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5 of 5 people found the following review helpful By J. Rose on June 20, 2007
Format: Paperback
I am very happy with this book. I have recently returned to college (having just celebrated the 23rd anniversary of my high school graduation). I needed a text to help me study for the CLEP accounting test. This book was exactly what the Doctor ordered... Accounting for Non Accountants along with the CLEP Study Guide was all I needed to pass (on the first attempt) with flying colors. Might I also add that I absolutely HATE accounting and I did very poorly in my H.S. accounting class 20 + years ago. Dr. Label's explanations are simple and straigt forward. The step by step examples are easy to digest and make sense as they build on each other. Very easy to grasp the GAAP...
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4 of 4 people found the following review helpful By Noah Glaser on January 19, 2010
Format: Paperback Verified Purchase
This book is good for people who want to look into starting their own business. It taught me how to read a balance sheet, and income statement and cashflow statement. It went over the importance of cash management and keeping a certain amount of cash on hand. I wish it would have explain debits and credits a little better but other than that I feel it is worth a good read. Debits and Credits were the hardest things for me to understand, and I had to reread the definitions a lot. If you are starting a business and you don't know anything about accounting you will get screwed. Please read a book like this, I have read and heard so many horror stories about people not keeping good books. Accounting is not exciting but it tells the story of your business and you will need that if you want to keep your business going.

peace.
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3 of 3 people found the following review helpful By C. Blackmoore on August 14, 2007
Format: Paperback
In an effort to effectively track budget, finance and marketing (historically, not the most compatible of departments) are working together to accurately track and define accrual and prepaid expenses for marketing activities, and for once I TRUELY KNEW what the heck they were talking about! It is all falling into place. Thank you. While accounting was relatively easy to learn when I was in school, it's another story now that I am actually working KNEE-DEEP in it. While this book is not for absolute beginners, it does a great job of providing simple explanations and examples for those already familiar with the basic terminology.
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3 of 3 people found the following review helpful By R. K. Shreckengast on September 16, 2008
Format: Paperback Verified Purchase
This book was my first read as a new business owner to start to learn about accounting. It was helpful for me, but I'm glad I also purchased the "Accounting for Dummies" book as well. After reading "Accounting for non-Accountants" I felt prepared for something a little meatier, and the "for Dummies" title was a good next step. So the two together was a good move for my needs. I recommend the book as a great place to start... but don't expect to be really ready coming out at the end unless you tackle something a little more in-depth as well. This book did what it said it would... it got me started.
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2 of 2 people found the following review helpful By Marie Anne A. on June 30, 2008
Format: Paperback
That's right! Dr. Label explains basic accounting in a such concise, simple way that YOU will get the confidence you need. Starting with the Generally Accepted Accounting Principles (GAAP) and ending with Generally Auditing Standards (GAAS), we follow the adventures of entreprenaur Sam and Solana Beach Bicycle Corporation. Important terms are in boldface type. Each chapter ends with a vocabulary review. With each definition, Dr. LAbel tells us how and why the term is used. Mathematical forumalas are demonstrated for the visual learner. Also, Dr. Label builds on the information he gives us. Nothing is ever "lost in space" after Dr. Label mentions it. For example, the Balance Sheet isn't just in one chapter, it's shown again and again, where relevant, throughout the book.

The appendix is financial statements of Station Casinos, Inc. Followed by an index.
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