Accounting

Accounting is very important n business and investing. Accounting isn't just about credit, debit, addition, subtraction, multiplication and division. Most of people learn about accounting at school, but failed to understand the essence of the subject. Most people concentrate only on the formal format of accounting and the numbers. The numbers itself is not important, but the vocabulary, the story behind the numbers that is count.

Generally, accounting consist of 4 column: Income, Expenses, Asset and Liabilities. The fundamental of accounting is the accountability. For instance, how to define assets or liabilities? It is hard to know whether a house or a car or a Rolex watch is an asset or liability when we do not see from the perspective of income and expenses. Well, the bank will list those stuffs i mentioned in assets column, but it is your asset or the bank asset. This is why we need to see the accountability of accounting format as a whole. The key point is the cash flow. Where is the cash flowing? It is flowing in and out of the expenses column or flowing in to the income column. Rule of thumb, when the cash flow in, it is a asset, and when it flow out, it is the liability. For example, a house or your home, if it make you pay the bill, the taxes, the amortization every months (Cash flow out) it is a liability. But , for the same house, if you rent it out, and generate positive cash flow after expenses, it is a asset. This the key, why most people are poor. Because they mis-understood the concepts of accounting. They bought the stuff they thought is an asset but in truth is a liability. They spend to make them poorer, but the rich spend to make them richer.