Video instructions and help with filling out and completing When Form 2220 Accounting

Instructions and Help about When Form 2220 Accounting

In this video I'm going to answer the question what is accounting what is accounting that's a really interesting question because accounting is a pretty broad field of study you have different things like corporate accounting tax accounting financial auditing so you have all these very diverse fields and so when you start thinking about what is the unifying factor between all these fields and accounting I think it's a very helpful conversation to have now I have some related videos that I've made on this I have a video on what is finance and I also have another video on the difference between finance and accounting so I'm going to put the links to those videos down below you can click on those and check them out if you're interested but I wanted to make a video specifically on accounting because accounting is something very special so when you talk about a definition for accounting the typical definition that you would find in textbooks go something like this accounting is the language of business or you might something find something like accounting is the means of communicating financial information now I think those are pretty good definitions but I want to suggest a different definition that's a little bit broader in scope so my definition goes like this accounting is the field of study that brings structure to chaos so this is a really interesting way of looking at accounting but let me give you an explanation of why I think of accounting in this way so if you look at the world around you there is chaos everywhere there is all of this economies is this complexity of relationships of people buying and selling and making transactions and exchanging currencies and market fluctuations there's two everywhere and what accountants are doing in almost every situation is they're finding ways of brain structure to that chaos so let me give you a couple of examples if we look at all of the fields of accounting we see this same kind of activity so let's look at managerial accounting or corporate accounting if you're an accountant working in a business you're doing things like bookkeeping and writing journal entries and generating financial statements well what you're doing is you're creating structure from the chaos of that business I mean if you look at a business you have all of these people who are doing deals who are buying things who are selling things it gets really complicated and it's hard to really understand what's going on in that business without looking at financial statements let's look at financial auditing what financial auditors do is they go into companies and they look at your accounting structures they look at your journal entries they look at your financial statements and they attest to the level of confidence in those numbers and so again they're dealing with whether this is a good structure to represent the chaos of your business now let's look at tax accounting and tax accounting is doing the same thing the tax accountant is looking at the financials of company and they're structuring them in a way that is helpful to send to the IRS and so again we're dealing with structure and bringing structure to chaos now there's a very important reason why it accountants do all of this if we look at the word accountant within the word accountant we find another word to count and it's no coincidence that this is here because accountants are all over the world counting things they're counting things in businesses and they're putting that information to spreadsheets and they're generating financial statements now the purpose why accountants are doing this the purpose why they're counting things is because it helps the rest of us understand the world so everybody is looking at this chaotic world around them and we need help understanding it and so a well structured financial statement helps us look at a business and be able to understand what's going on so let me give you a very simple example of this let's say you were to walk into a factory of a hundred workers so you walk into this Factory you walk through the door and you stand there and you're looking at these hundred workers and they're running around they're very busy doing stuff building stuff filling out paperwork as a bystander you standing there in this factory could you answer the question is this factory profitable well no you can't you could look at these workers and you could tell if they're busy or not but whether they're busy is not the question the question is are they profitable and for instance if they're busy building things but they have no sales this might not be a profitable Factory so just by standing there looking at the chaos around you you can't really understand what's going on but on the other hand in the same example if you're going to go and talk to the accountant of this Factory and spend five minutes with that person you would know instantly the answer to that question are they profitable or not you would instantly be able to understand what's going on because that accountant spends all day long in that factory counting things and putting them into a spreadsheet so accountants help for instructure to do this chaos but the purpose of why they do that is because it helps everybody understand the world around them and I'm going to go even a step further because it not only helps us understand it allows us to understand and something very important called productivity now productivity is something that you can determine by looking at financial statements and looking at how profitable a company is compared to the assets on their balance sheet and productivity is something that's very important to understand because if you look at an economy and you can tell what areas