Accounting literacy is the ability to clearly understand and communicate financial situations and events. It manifests as the ability to read and make sense of financial reports such as balance sheets and income statements. Accounting literate people are able to see and describe financial matters with clarity. They can think clearly about money.
Modern life is financial life. Whether it is running a household budget, saving for retirement, starting or running a business, paying for education, or investing for the future… managing our lives is in large part managing our finances.
Being accounting literate is being able to clearly see a financial situation for what it is. You may or may not like what you see, but you see it clearly. Knowing where you are situated financially is the first step to changing your financial future. In other words…
To get ‘there’, I’d better know where is ‘here’.
Accounting literacy allows you to be with the status quo. Being clear on where you are and what’s come before makes you more powerful to change and control your life. Clarity about the present is the starting point for changing the future.
In all communities, accounting literacy is the first step towards financial harmony and a life that supports health, wellbeing and prosperity.
In developing communities accounting literacy education can offer additional benefits. Accounting skills can lead to employment as a bookkeeper or accountant, and this can mean the difference between life in a shack and middle class prosperity.
DIFFERENT FROM FINANCIAL LITERACY
Accounting literacy and financial literacy are not the same. Accounting literacy is a precursor of financial literacy.
Financial literacy is the ability to make sound financial decisions and manage your financial affairs. Financial literacy education typically covers topics such as
Accounting literacy comes before all of this. It deals with the elements that make up all of these issues.
Being accounting literate means being clear about
Many people’s financial woes are not due to a lack of understanding about investment products and suchlike. Rather, the root cause of people’s financial difficulties is first not being clear about the basic facts of their financial circumstances.
Accounting literacy is the foundation upon which financial literacy stands.
The Accounting Literacy Foundation believes that a lot of financial literacy education is less effective than it could be because it is not built on a foundation of accounting literacy.
EASY TO ATTAIN
New developments in accounting education have made accounting literacy easy to attain. In particular, the introduction of desktop printing in the 1990s made it possible to present accounting information graphically, using logical color.
The BaSIS Framework™ is a representation of the Balance Sheet and Income Statement that makes grasping accounting intuitive. The framework is available for free public use under the BY-NC-ND Creative Commons license. You can download the Framework in PDF form below.