We accountants are so immersed in the language and practices of accounting, which have evolved over hundreds of years, that we’ve lost sight of our bad habits.
Here are five of them.
For example, earnings, profit, net profit, income, and net income are all used to mean the same thing.
2. We Use the Same Word for Different Things
In the UK “Income” means revenue, the top line. In the US “Income” usually means profit, the bottom line. But not when you’re talking about Rental Income, or Interest Income.
3. We Use Weird Words
Like debit and credit - which have less meaning than people believe. (That’s why Color Accounting uses color instead.)
4. We Use Paradoxical Words
Prepaid Expenses aren’t expenses, they’re assets.
Deposits (such as those received by Tesla for future Model 3 deliveries) aren't revenue. They are liabilities.
5. We Collapse the Duality
There’s an inherent duality in accounting. The duality captures on the one hand what we do with our resources, and on the other where those resources come from. For example, we put cash in our bank account, which came from our work revenue. The bad habit is describing the revenue as the cash.
To boost the confidence of our students to engage powerfully in financial conversations at work, we show them that “The confusion isn’t your fault, it’s ours. So ask away.”
We accountants have a lot to account for.