Secret #1: Understanding Basic Concepts

The first step on the road to behavioural science is to understand the basic concepts of accounting. Imagine that accounting is the language that businesses speak – you need to learn this language to be able to communicate with them.

So what are these basic concepts?

• Balance sheet – is a list of assets (property values) and liabilities (sources of financing) of the company. It is a kind of “photo” of the company’s economic situation.
• Profit and loss account – is a statement of income and costs of the company over a certain period of time. This gives us information about the financial result of the company.
• Main book – is a guide to the financial history of the company.
• This is where all financial operations and transactions are recorded so that we can follow how it develops.