Summary of The Power of Accounting

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Rating

7

Qualities

  • Applicable

Recommendation

If you are terrible at math, hate numbers and find financial analysis a bore, this slim volume is for you. Professor Lawrence D. Lewis helps the numerically challenged understand and appreciate how important, instructive and beautiful accounting can be. He explains how managers make strategic decisions using the information accounting provides. Lewis includes summaries and exercises at the end of each short, easy chapter. His enlightening quotes and witty references make debits and credits seem almost fun. getAbstract recommends this basic primer on “the language of business” to students, new managers and anyone seeking accounting know-how.

About the Author

Lawrence D. Lewis is an author, a consultant and an accounting professor at the University of Portland.

 

Summary

Accounting as Art and Science

Accounting deals with numbers, formulas and ratios. Accounting’s results are “reasonable estimates or approximations of real-world economic events.”

Like a language, accounting’s meanings and vocabulary vary according to who’s using them and for what purpose. Accounting comes in two forms, financial accounting for outsiders and managerial accounting for insiders. Financial accounting concerns collecting and reporting data to users outside a company, such as bankers, investors, regulators or vendors. The arbiters of the financial accounting language used in the US are the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB), which set the generally accepted accounting principles (GAAP) that all businesses must adopt in financial reports to those outside the firm.

People inside a firm rely on confidential managerial accounting for the day-to-day information they need to run the business and plan its strategies. Managerial accounting doesn’t depend on a sole, agreed-upon language. Different types of firms use different conventions to arrive at the data they need. For instance, manufacturer and...


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