Oct 12, 2022

Accounting for business, life and beyond

Prof. Sapna Malya

I have been teaching subjects related to accounting and finance for almost two decades now.  Every time I start teaching the basics of accounting in the class, I start with the core concepts, which are the foundation of the subject.  Often I have felt these foundations are so similar to the foundations of human living, or to put it in simple terms, these concepts follow some basic principles of life.

We have a concept in accounting called the Going Concern Concept.  According to this concept, transactions in business are recorded assuming the business will continue for ever.  We record unpaid expenses, advance received for a job based on this concept, where we assume that the business will continue in the future to pay off these expenses and deliver the job for which the advance is received.

Many religions do talk about rebirths and reincarnations.  I wonder is that not a going concern in human lives.  People believing in the theory of reincarnation are certain that living beings take births in different forms, life after life.  But the only thing with remains constant, unchanged and connects all these lives is that enlivening principle called the Self / Soul or Consciousness.

Another accounting concept, which I often co-relate to existence of life, is the Entity Concept, which is based on the concept that business is considered separate from its owner.  However close an owner finds himself to the business, accounting treats the business and the owner as two different entities.    Therefore, whatever the owner does in his personal capacity does not affect the business at all and vice versa.

The individual and his business are two separate entities in the eyes of the law, so too the individual being and the Self are two different entities in the eyes of the Law of Universe.  People do believe that all living beings have a body, but what enlivens the body is the Self within.  Though the Self is within the body, appears one with it, it is still different.  Body perishes but the Self is imperishable and continues to take different forms, as explained earlier.

Many of us believe in the Law of Karma.  As you sow, so you reap, is a popular phrase we all have grown up with.  Every cause has an effect. Every action has an equal and opposite reaction is the Newton’s third law of motion.  However, when I look at this Law of Karma, I find it similar to the Dual Accounting concept.

In accounting too, we record transactions with the double entry book keeping system, where every entry has a debit and equal and opposite credit.  Debit can be compared to an action and its opposite credit could be comparable to its reaction.

Debt for a business is an important source of raising finance.  It is a leveraging tool, which enhances growth and creates a better ROI for the investors.  However, it has to be taken with great caution.  More debt increases the risk of the business and a tool, which is bound to increase the ROI, could be the reason to make the business go bankrupt.

This concept of finance fits in many aspects of our lives too. If anything is done in life based on what we like without thinking about the desirability of it, then we may land up in a disastrous situation over a period.  Some things may be enjoyable at the beginning but if repeatedly pursued may be harmful at the end.  For an example, if one likes eating chocolates, and goes on eating it just to get pleasure, one may land up ruining long term health.  Actions should not be decided based on ones likes and dislikes but based on reasoning and logic.




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