If Accounting is clerical, Finance is intellectual...

Was just surfing through the net today and randomly found this bit of 'something new' article. There is this book called "Romancing The Balance Sheet" written by Anil Lamba where he laments that there are no words like 'Debit' and 'Credit'. The reason for confusion, is the fact that these two words have no meaning by themselves, the author opines.

This is something which striked me hard. The author puts that debit and credit are two commonly used, yet greatly misunderstood, accounting words. Stating that he has rarely came across anybody who can confidently attribute a meaning to each of these words, he informs that there is invariably a feeling that one is a gain, the other a loss; and that one is positive, and the other, negative.

He explains that these words are used, primarily, in the context of the system of accounting in use almost all over the world, called the double-entry system of book-keeping, whereby each transaction has an effect on two account heads. "By themselves, these words represent neither good-bad, nor positive-negative. They simply represent two opposite impacts."

To those non-accountants who still wonder what makes the number in an account-head go up or down. as a result of transactions, a simple illustration given in the book can help- that a debit in a debit account serves as a plus and a debit in a credit account serves as a minus. "Similarly, a credit in a credit account has a positive effect, and a credit in the debit account has a negative effect, so to say."

Lest you begin to fret about the woes of number-crunching, Lamba distinguishes between accounting and finance, in an intro chapter. If accounting is clerical, finance is intellectual, he clarifies. "Finance starts where accounting ends. You may be unable to understand accounting, but you could still manage to understand finance..."

Re-assuring study for non-accountants who have to manage accountants. :-P :-D


P.S.
You may buy this book here- http://www.landmarkonthenet.com
Initially while reading this article, it brought a kind of *feel good* thingie, but what was written in the end did what my dear friend on Twitter says, "Sapna Powder Powder Ho Gayaa." :P And as it's pouring water heavily from the God's home outside, I'm unwinding to Kishore Da's one of the classic-est song [if I'm allowed to put it this way], Rim Jhim Gire Saawan, as I conclude this post. :)