How to become an accounting ace (or how to spot one).
No matter how you formally name, dress or present any topic, you must be able to see its substance.
Step up your accounting game with just 4 simple steps.
First, recognize the issue.
You must be able to correctly identify the topic and a relevant accounting standard/ interpretation.
Examples:
A substance for a medicine in an experimental trial stage - > research IAS 38 Intangible Assets.
A medicine containing the substance gets approved -> development stage IAS 38 Intangible Assets.
The medicine gets mass produced -> inventory IAS 2 Inventories.
Sales proceeds from the medicine - > revenue recognition IFRS 15 Revenue from Contracts with Customers.
Getting sued by a customer for a harm caused by the medicine - > liabilities/ provisions IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
Only after you properly identify the subject matter, you will be able to design proper accounting treatment.
Secondly, be aware of traps and dig deep. An eager proposal from a non-accountant seeking certain outcome in their books might look like this:
“Well, surely we might call a transaction in a contract “a sale of xy”, if that helps us book revenue and improve our top line, no problem with that." (there is no sale based on contractual terms). Here is where my favorite principle comes into play: Substance over form.
Substance is the key.
No matter how you name, dress or present any topic (= form), you must be able to see clearly an underlying item (=substance) and account for it accordingly.
Thirdly, documentation matters - a lot. Read the documentation on a problem to be solved - all of it.
Even if it is boring (it can be, more often than not).
Even if it is too technical.
Ask Google if you need an understanding of:
- norms and regulations,
- software or technical terms,
- stock or agricultural reports,
- legal/ tax issues & terms.
Be careful about and double check when asking AI, especially concerning factual topics.
Ask people too. Actually, ask relevant people (experts on the subject matter) first.
Fourthly, do not ommit underlying documentation concerning the issue in question. Flying over it or dismissing it altogether might lead to wrong conclusions. You might miss a key piece of information or misunderstand the rights and obligations of parties to an agreement.
Finally, think about "3Ts": Total (value), Time, and Trajectory.
Is the value of an item in question significant (material)?
Is it a single item (isolated case) or a population with similar characteristics?
Will an issue become smaller or bigger with passing of time?
What are your tips of becoming an accounting ace?
