Managing money effectively is an important key for success, both personally and professionally. Financial literacy involves learning skills and information about finances and then using this knowledge and these skills to manage money successfully. Applied correctly, these skills should carry a person through every stage of life so they will remain solvent and successful. While not everyone desires to become an accountant, even learning basic accounting skills can be beneficial for anyone seeking to manage finances successfully.
Personal financial literacy involves a variety of financial skills. At the most basic, everyone must be able to manage a checking and savings account to keep a balance of money. These skills also involve making a personal budget to project expected income and plan expenses. It's also helpful to learn skills for comparison-shopping to spend money wisely. Applying these skills enables smart money management, planning for the future, and effective saving strategies.
It's common for consumers to receive many different offers for credit cards and loans. A consumer without strong financial skills might not manage these offers effectively. The results of credit mismanagement can be devastating to a consumer's financial well-being. Over-extension of finances through too many loans and too much credit can be a serious financial blunder. Some people may even find themselves in a bankruptcy or foreclosure situation if they do not manage their finances prudently. Financial literacy enables people to manage debt and credit responsibly. Knowing about proper use of credit and how to avoid excessive debt are important skills for successful finances.
While many people choose to hire a professional accountant to manage the books, it's possible to perform some of these tasks yourself. Managing income statements is a basic accounting task. The income statement is a record of the cash coming into a business exchanged for services or products going out. This income can be in the form of cash, or it might also be revenue from accruals. An accrual is an adjustment for an earned revenue that has not yet been recorded in accounting records. A prepayment may be a simple way to think about an accrual. An income statement is a way to measure the profitability of a company during a specific period of time. Businesses must also track expenses carefully. By matching both revenues and expenses, it's possible to get an accurate idea of the bottom-line profitability of a company for a specific time period.
When teaching accounting, educators have a variety of tools available. The basic lecture to present information is one way to teach accounting, but some students don't respond readily to this teaching method. Providing examples in conjunction with lecturing can make it easier for students to understand some principles. Assigning projects and group activities to students is another effective way to teach information to students. People can use class time to work on tasks while a teacher supervises and assists with the process. Project assignments can be helpful for engaging students and making lessons seem more relevant. Computer programs are also helpful tools for teaching accounting lessons.
The business world can be a complicated place. While it is helpful to hire professionals for many tasks associated with owning a business, it is also advantageous for a business owner to have a personal and professional understanding of many of these concepts. Virtually everyone uses accounting skills in both types of situations. Managing bank accounts, planning a budget, understanding interest rates, and being able to understand and analyze a financial statement can help anyone succeed. Examining a financial statement and understanding the data contained therein helps with determining net worth as well as making long-term plans for the future. Even preparing and planning for retirement many decades in the future requires careful personal financial planning to achieve goals.
Return to Home Page