The Importance of Learning Accounting and Finance in the Commerce Courses
I remembered the time when I took my two-year Associate in Computer Science course and man I found the first accounting subject tedious. Introduction to accounting was rather tedious since it required balancing--something that takes a lot of extra attention. The next accounting subject was Partnership and Corporation Accounting. The first two accounting subjects were really that tough for me. I felt balancing was my biggest Waterloo. In chemistry, my most disliked aspect was stoichiometry which involves balancing the elements. In physics, perhaps my most disliked part of its application was the use of the balance. In short, balancing is one subject that's necessary but I feel I need to exert more effort than usual. Commerce courses really needed them such as Business Administration and the Hotel and Restaurant Management courses.
The time came when I had my next two accounting subjects--cost accounting and management accounting. I managed to get a better score in those two courses even if the teachers were strict. They had to be strict because accounting is a very important application. Both cost accounting and management accounting is all about maximizing profit as much as possible. I guess these subjects got me more interested because while the first two accounting subjects were based on balancing--the next two appealed to my greed. I was thinking about maximizing profits as much as possible.
My fear of the accounting subject was defeated by cost accounting. My teacher was rather known to be strict. She was known to flunk without hesitation. However, she only flunked those who deserved it. I barely got the hang of it during the midterm. However, finals were pretty much where I got the hang of things. Most of the exams were based on cost computation and less on balancing. Learning about the cost of production and the various inventory methods was rather fun. It would tell you to give the right price which isn't too high or too low without compromising quality. Though, you sometimes need to raise prices if you're improving quality. The subject also defeats the idea of getting rich quick since it requires extreme patience to make sure that the price is right. The right cost of materials, the right cost of equipment, the right cost of labor, and just everything to make you have a good Return on Investment (ROI).
Management accounting is the next step. It applies the processes of cost accounting to a managerial level hence the name. I think about how my mind was rather an at ease with management accounting even if I had to take the most difficult operations management subject (which used advanced calculus) ever. I had a good grade in the midterm but had been badly battered during the finals. Management account though remained consistently difficult that I got the hang of it.
The finance subjects came in. The difference between finance and accounting is the approach. Accounting is focused on the process of reporting and communicating the financial status of the company. A good example is how accounting tells you how much money is spent and left during the operation. Cost accounting may tell you the profits you made after all expenses were paid. Meanwhile, finance tells us how an organization generates and uses capital. Accounting will tell you how much money you have. Finance tells you how to generate and use capital. Finance will be looking forward such as how an investment will do. Finance would be focused on investing the capital for the future.
It's not enough for a company to get a net income. Sure, the accounting will tell you to avoid this and that move because you will get negative. However, finance will tell you where to put the money to let it grow or how much money to put into it. There are many ways to let capital grow yet there are also risks. Finance will tell you how to invest by not putting your eggs into one basket. For example, a corporation may enter the stock market because it earns money from the buy and sell process. Some people buy stocks when they get lower and sell when they are higher. Some people buy at a higher price for some reason such as long-term investments (buy and hold). However, the company can't rely on stock issuance all the time. The company may choose to also put some of its earnings in time deposits, bonds (which is for government spending), Unit Investment Treasury Fund (UITF), Long Term Negotiable Certificate of Deposit (LTNCD), or any other legitimate ways to do it.
Both finance and accounting may also tell you why you should avoid Get Rick Quick schemes. Simple knowledge of accounting and finance can tell you why a Ponzi scheme or Pyramid Scheme won't.work. I remembered the double your money deal which really can be rather dangerous. In a Ponzi scheme, initial investments get big returns but where did the one running the investment get the money? It's because you get money from Paul to pay Peter to pay John, right? Do some accounting and you'll notice that there's monkey business. No sound finance adviser or manager will ever recommend trying to get rich quick fast. I guess that's why some people said AXA was a "scam". Ironic how some people called legitimate financial institutions a scam (they just don't bother to see there's such a thing as market volatility) all the while they get misled by other Get Rich Quick schemes.
Besides, there's such a thing as understanding the process or gaining empathy. Learning maths and sciences in high school help us explore the world around us. Learning geometry and trigonometry in high school may help you appreciate the house you live in or your workplace even if you're not using it in your livelihood. In this case, learning accounting and finance will help businessmen understand the difficulty of the job in the finance department. It may also help spot a dirty accountant or make the decision of firing him or her for making dishonest records. Learning both subjects had made me think that if there's a price increase in non-luxury items--there's a reason. Sometimes, non-luxury brands end up selling some highly-priced items because of better features like a smartphone with better camera, bigger memory, and the like cost a lot of money. Not knowing these will really just baffle anyone as to why costs have to go higher (or lower) depending on which price is right to generate the most profit.
