in this video I'm gonna give you three reasons why understanding accounting is important for non accountants hey viewers is James here and welcome back to accounting stuff the place where we discuss all things accounting I was wondering what topics covered this week so I started scrolling through the requests that you guys have sent me in the comments and by the way a big thank you for those suggestions because it really helps me out when it comes to cleaning out of these videos anyways I digress I was scrolling through the comments and I came across this one from Tushar searched ava i hope i'm pronouncing that right why is it important to learn accounting for non accountants and i must admit this question got me wondering there are a few different ways you could go about tackling this one in the end i thought you guys might get the most value out of this if i talked about the ways in which an understanding of accounting can benefit the everyday person or non accountant going about their day-to-day lives so Tushar I hope that is what you meant and if it isn't then let me know in the comments below and I'll see about making another video I thought long and hard about this question and came up with three ways that learning accounting can benefit to know an accountant don't yet stick around to the end because I've saved the best till last the way it's not waste any more time why is it important to learn accounting for non accountants I'm gonna explain why now first of all I think it's important to remind ourselves what accounting actually is because it could be a bit of an alien concept to a non accounting accounting as the systematic means of recording processing and summarizing financial transactions whew that's a mouthful yes it is but I'm gonna break it down for you accounting is a systematic process systematic means it needs to be done consistently on a regular basis it's a means of recording financial transactions this relates to noting down the key details of each and every financial transaction that affects a business it's also a way of processing that data that you've gathered by classifying those transactions into separate groups at related transactions and analyzing them in order to extract meaningful information from them the final step is summarizing that information by producing reports show your findings and providing them to the various stakeholders this could be your boss management the owners of your business shareholders or investors so that's what accounting is but what's the value of it to the everyday person going about their lives like you or me the first place that I think accounting comes in handy is when it comes to setting long term goals getting out of debt buying a car buying a house getting married starting a business saving up for your kids education and your own retirement the key part of accounting is forecasting that's where accountants look back at historical data and make estimates and predictions of where business will be in the future these predictions can include estimated sales what future expenses might be and what the cash position might look like these techniques can be applied in everyday life when it comes to setting the long-term goals because you'll be able to put a value on the future cost of those goals and knowing your income and expenses you can create a savings plan in order to help you reach those goals and that brings me on to reason number two budgeting budgeting is where you set yourself short-term financial targets to help you achieve that savings plan that you created when setting those long-term goals you might want to think of long term goals of stuff you hope to achieve in 2 or 20 years or even longer if you're thinking that far ahead whereas budgeting relates to a shorter period of time like a year or two or even less budgeting is a very important area of accounting it's where business says its sales targets and spending limits for the coming year this affects everyone that works at a company because performance bonuses and salaries tend to be directly linked to the performance of the business against its budget if a business surpasses its short-term goals then great everyone's happy and there's a chance the employees might get rewarded with a bonus however when a business misses those targets your chances of that bonus are looking a lot more bleak and in more extreme cases people's salaries could get reduced or even worse people could get fired these skills that you pick up when budgeting as an accountant can be applied in everyday life towards your own budget there are many financially conscious people who create spreadsheets or why in journals to track their income and expenses every day in order to help make sure they reach their long-term goals I'm curious do you guys budget I would love to hear from you in the comments below another way the accountant comes in useful is when you're making investment decisions investing is where you lay down your money now with the expectation that you'll see a return or a profit in the future businesses invest in assets all the time in the hope that they would generate future earnings and is the reports created by accountants that hope management decide where to allocate the resources available to them in addition to this the financial statements that listed companies are obliged to prepare and make available to the public are created by their accountants investors read over these statements and decide whether to buy shares in companies of the back of this information as individuals we make loads of investment decisions throughout our lifetimes and those are limited to the stock exchange we invest in our education our car our house we also invest our time in relationships and in exercising to get fit the skills learnt in accounting can help us with all of these where the rewards are financial it certainly can it enables us to work out the return on our investments and compare them against each other to help us make the decisions that are best for us now I said I was only gonna give you three reasons why learning accounting can benefit non accountants but I've got a fourth and I'd really like to share it with you I think this one's the most important and it kind of encompasses the three that we just talked about financial literacy becoming financially literate is the process of educating yourself to being able to manage your money your personal finances and your investments efficiently and effectively it's one of the most important skills that you can have in adult life but it doesn't seem to get taught much at school becoming financially literate can literally change your life and make your dreams come true or at least some of them if won't be able to get you a new boyfriend or girlfriend but it will help you by creating a stable platform to help other areas of your life flourish it teaches you to budget and save the value of money and interest and how to navigate your way through all that financial jargon that's thrown us everyday accounting can teach you to become financially literate it's not the only way to get there there are other ways too but studying and counting is a surefire way to ensure that you commit the time and energy required in order to build this life skill so crucial thanks again for your suggestion and I hope that answers your question and to the rest of your accountants and non accountants out there if you found this video useful give it a like share it subscribe if you haven't already and don't forget to hit that notification bell so you don't miss out in the next video if you can think of any other life skills their accounting teaches us I'd like to hear your thoughts in the comments below if you're interested in learning more about accounting I've put together a playlist on accounting basics that you might want to check out I release new videos every Monday here on this channel so come join us and as always see you in the next video [Music]