Notable quotes about accounting

Accounting is the operating system of modern enterprise: it converts complex economic activity into numbers that guide decisions, shape incentives, and—when done well—earn trust in what is reported. This definitive collection brings together investors, regulators, academics, executives, and writers to illuminate accounting as a business language, a discipline of measurement and valuation, and a governance mechanism where transparency and integrity determine the credibility of markets and institutions.

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Accounting as the language of business

“Double-entry bookkeeping… is one of the finest inventions of the human mind, and every prudent master of a house should introduce it into his economy.”

— Johann Wolfgang von Goethe (through a character in *Wilhelm Meister’s Theatrical Calling*) Johann Wolfgang von Goethe, German writer and statesman

“Accounting is the preparation and generation of information and the aggregation of that information in a way that’s useful in decision-making.”

— Catherine Schrand, Wharton accounting professor Catherine Schrand, accounting professor at the Wharton School

“If you’re interested in business, I definitely think you ought to learn all the accounting you can by the time you’re in your early 20s. Accounting is the language of business.”

— Warren Buffett, investor and CEO of Berkshire Hathaway Warren Buffett, American investor and chairman and CEO of Berkshire Hathaway

People are accustomed to thinking of accounting as dry and boring, a necessary evil used primarily to prepare financial reports and survive audits, but that is because accounting is something that has become taken for granted.

— Eric Ries, Author Eric Ries, American entrepreneur and author of The Lean Startup

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It sounds extraordinary, but it’s a fact that balance sheets can make fascinating reading.

— Mary Archer, British scientist Mary Archer, British scientist and academic

I have no use for bodyguards, but I have very specific use for two highly trained certified public accountants.

— Elvis Presley, American singer and actor Elvis Presley, American singer and actor

“We think a lot about how to communicate financial information to our investors and lenders… We should think more about how we communicate it to our employees so that they understand it.”

— Ed deHaan, accounting professor at Stanford Graduate School of Business Ed deHaan, accounting professor at Stanford Graduate School of Business

“To be good at your business, you have to know the numbers—cold.”

— Harold Geneen, former chairman of ITT Corporation Harold Geneen, American business executive and former ITT chairman

“It’s wild that we are not teaching all of our middle schoolers and high schoolers how to manage household finance, understanding things like credit and interest and risk… You need to go in recognizing the house always wins on average… We must learn to speak the language of business.”

— Ed deHaan, accounting professor at Stanford Graduate School of Business Ed deHaan, accounting professor at Stanford Graduate School of Business

“Obviously, you have to know accounting. It’s the language of practical business life. It was a very useful thing to deliver to civilization… double-entry bookkeeping was a hell of an invention… although accounting is the starting place, it’s only a crude approximation.”

— Charlie Munger, vice chairman of Berkshire Hathaway Charlie Munger, American investor and former vice chairman of Berkshire Hathaway

“The books cannot be closed unless the debits equal the credits; when the debit and credit have been separately summed, the two sums shall be equal.”

— Luca Pacioli, Renaissance mathematician and “father of accounting” Luca Pacioli, Italian Renaissance mathematician and Franciscan friar

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Measurement, incentives, and valuation

The word accounting comes from the word accountability. If you are going to be rich, you need to be accountable for your money.

— Robert Kiyosaki, author of Rich Dad Poor Dad Robert Kiyosaki, American businessman and author of Rich Dad Poor Dad

“Tell me how you will measure me, and I will tell you how I behave. If you measure me in an illogical way… do not complain about illogical behavior.”

— Eliyahu Goldratt, management theorist and author of the Theory of Constraints Eliyahu Goldratt, Israeli management theorist and author of the Theory of Constraints

Capital isn’t this pile of money sitting somewhere; it’s an accounting construct.

— Bethany McLean, American journalist Bethany McLean, American journalist and author

“Managers and investors must recognize that accounting numbers are the beginning, not the end, of business valuation.”

— Warren Buffett, investor and CEO of Berkshire Hathaway Warren Buffett, American investor and chairman and CEO of Berkshire Hathaway

Companies run by engineers don’t make money, but companies run by accountants don’t make anything at all.

— Peter Krueger Peter Krueger, Business executive and management commentator.

You have to understand accounting and you have to understand the nuances of accounting. It’s the language of business and it’s an imperfect language, but unless you are willing to put in the effort to learn accounting – how to read and interpret financial statements – you really shouldn’t select stocks yourself.

— Warren Buffett, CEO of Berkshire Hathaway Warren Buffett, American investor and chairman and CEO of Berkshire Hathaway

“Carl Braun did not know how to read a profit-and-loss statement or a balance sheet to save his life. He would say, ‘Our standard accounting method is asinine. We’re building oil refineries, for God’s sake. Accounting costs for all our corrosion costs as if they were an ordinary cost like office supplies. That’s crazy. We must integrate corrosion costs right into the balance sheet.’”

— Charlie Munger, vice chairman of Berkshire Hathaway Charlie Munger, American investor and former vice chairman of Berkshire Hathaway

To be successful, you should concentrate on the world of companies, not arcane accounting mathematics.

— Warren Buffett, CEO of Berkshire Hathaway Warren Buffett, American investor and chairman and CEO of Berkshire Hathaway

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Risk, volatility, and managerial judgment

“Accounting does not make corporate earnings or balance sheets more volatile. Accounting just increases the transparency of volatility in earnings.”

— Diane Garnick, investment strategist at Invesco Diane Garnick, investment strategist at Invesco

“Proper accounting is like engineering. You need a margin of safety. Thank God we don’t design bridges and airplanes the way we do accounting.”

— Charlie Munger, vice chairman of Berkshire Hathaway Charlie Munger, American investor and former vice chairman of Berkshire Hathaway

It has been my experience that competency in mathematics, both in numerical manipulation and in understanding its conceptual foundations, enhances a person’s ability to handle the more ambiguous and qualitative relationships that dominate our day-to-day financial decision-making.

— Alan Greenspan, former Chairman of the U.S. Federal Reserve Alan Greenspan, former chair of the U.S. Federal Reserve

I thought I could start over, you see. But now I know you can never start over. Not really. You think you have control, but you are like a fly in somebody else's web. Sometimes I think that's why I like accounting. All day, you are only dealing with numbers. You add them, multiply them, and if you are careful, you will always have a solution. There's a sequence there. An order. With numbers, you can have control.

— Barack Obama, 44th President of the United States Barack Obama, 44th U.S. president

Life is like accounting, everything must be balanced.

— Gail Godwin Gail Godwin, American novelist

Managers thinking about accounting issues should never forget one of Abraham Lincoln's favorite riddles: How many legs does a dog have, if you call a tail a leg? The answer: Four, because calling a tail a leg doesn't make it a leg.

— Warren Buffett, CEO of Berkshire Hathaway Warren Buffett, American investor and chairman and CEO of Berkshire Hathaway

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People don’t pay attention. And then one day there’s an accounting. And after that, nothing is the same.

— Cormac McCarthy, American novelist Template:Cormac McCarthy/attribution

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Integrity, transparency, and public trust

“We must not let pressures to satisfy Wall Street expectations or unrealistic demands to deliver a certain quarterly earnings result lead us to compromise the quality of our accounting and financial reporting. We must adhere to the highest quality standards.”

— Arthur Levitt, chairman of the U.S. Securities and Exchange Commission Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission

“History, common sense and experience tell us that at the heart of our markets are faith and trust in the honesty of corporate financial records. One who weakens that trust without good cause does no one a service.”

— Byron Woodside, former SEC commissioner (as quoted by Arthur Levitt) Template:Byron Woodside/attribution

In the long run, management stressing accounting appearance over economic substance usually achieves little of either.

— Warren Buffett, CEO of Berkshire Hathaway Warren Buffett, American investor and chairman and CEO of Berkshire Hathaway

“When any cunning man keeps two books, one with honest entries and the other with false, he hides the truth, and you cannot rely on it; therefore be careful to keep your books with truth and integrity.”

— Luca Pacioli, Renaissance mathematician and “father of accounting” Luca Pacioli, Italian Renaissance mathematician and Franciscan friar

“When accounting practices are defined more by gimmickry than by their representation of underlying business conditions, public trust is jeopardized.”

— Arthur Levitt, chairman of the U.S. Securities and Exchange Commission Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission

“Creative accounting is an absolute curse to a civilization. One could argue that double-entry bookkeeping was one of history’s great advances. Using accounting for fraud and folly is a disgrace. In a democracy, it often takes a scandal to trigger reform. Enron was the most obvious example of a business culture gone wrong in a long, long time.”

— Charlie Munger, vice chairman of Berkshire Hathaway Charlie Munger, American investor and former vice chairman of Berkshire Hathaway

Never call an accountant a credit to his profession; a good accountant is a debit to his profession.

— Charles Lyell, Scottish geologist Charles Lyell, Scottish geologist

“We must guard the integrity of the process. In doing so we will strengthen investor confidence, achieve a higher quality of financial reporting and serve the best interests of our Nation.”

— Arthur Levitt, chairman of the U.S. Securities and Exchange Commission Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission

“I think Enron is the first shoe to drop. There’s a kind of Gresham’s law, where bad conduct drives out good conduct.”

— Charlie Munger, vice chairman of Berkshire Hathaway Charlie Munger, American investor and former vice chairman of Berkshire Hathaway

“In insurance, as elsewhere, the reaction of weak managements to weak operations is often weak accounting.”

— Warren Buffett, investor and CEO of Berkshire Hathaway Warren Buffett, American investor and chairman and CEO of Berkshire Hathaway

“No CEO examining books today understands what the hell is going on… Accounting has steadily degraded over the past 30 years, and accounting firms have sold out time after time.”

— Charlie Munger, vice chairman of Berkshire Hathaway Charlie Munger, American investor and former vice chairman of Berkshire Hathaway

Creativity is great but not in accounting.

— Charles Scott, American businessman and former CEO of Intermark and Fuqua Industries Charles Scott, business executive and former CEO of Intermark

I would argue that a majority of the horrors we face would not have happened if the accounting profession developed and enforced better accounting.

— Charlie Munger, vice chairman of Berkshire Hathaway Charlie Munger, American investor and former vice chairman of Berkshire Hathaway