Bookkeeping and Accounting

Do you know the difference between bookkeeping and accounting? Do you know what depreciation is? As an NES scholar, I am lucky to have a number of free business courses available to me. I spent this week at a marketing and finance course and the finance part was just brilliant. Firstly, I learnt that bookkeeping is the day to day log of money coming in and going out of the business and accounting is the year end look at how much money was spent and how much money was made. In short, bookeeping deals with the minutiae and accounting deals with the big picture. So the accountant can show that the business is profitable whilst the bookkeeper knows that there is no money to pay anyone.
It is a funny thing when your father is an accountant and your brother is also and you cannot do a cashflow forecast to save your life. Actually, I can do a cashflow forecast, I just don't like doing it. I am a trained scientist and we like precision. There is no such thing as guessing. When you guess as a scientist, it is called a hypothesis and people do not take it as gospel. What you do with that hypothesis is continue to work on it until you can prove that it is correct. What I have been told by many people is that when you do a cashflow forecast, you are guessing pretty much everything especially if you have never had a similar business and there isn't someone close by who is doing what you do. The guessing is not as bad as people telling you that whatever your forecast, remember that it will cost a third more, and you will sell a third less and it will take a third longer. Well why don't we just put those assumptions into the cashflow forecast? Well if you do the proposition might not look so good for a bank or an investor. Anyway, I'd given up with the whole thing.
Now, however, I know the difference between a balance sheet and a profit and loss statement. I also know not to buy any equipment which depreciates, i.e. loses it value. So if you can lease things like kitchen equipment, photocopiers, printers, computers, pretty much everything. Not only is there a tax benefit to doing it but you can avoid the depreciation which can be up to 40% of the initial value in 3-5 years. I know how the difference between costing and pricing and how my competitors price their products. So now I am ready to roll. All I need to do now is to find out how much everything costs!

Amiex