This example will help you to appreciate that you are working with accounting data on a daily basis, and continues the topic from pages 10-12 of Chapter 1.
Your bank sends you a bank statement each month or you can look at your account online. You may not have thought about it like this before, but this bank statement/online presentation of transactions is accounting information. Let's see how it meets the criteria in our definition.
| Accounting summarizes | Your bank statement summarizes the transactions going through your bank account each month and presents them as a list of receipts and payments into and out of your account. |
| numerical data | It presents these transactions as numerical data: cash in and cash out with a balance at the start of the month and a balance at the end of the month. |
| relating to past events | All the transactions in your bank statement relate to past events, what has happened in your account over the previous month. |
| and presents this data as information to managers | You are the manager of your account and the information in your bank statement is presented to you so that you can see what has happened over the past month. |
| as a basis for both decision making | Once you have your bank statement you can make decisions about increasing the money flowing into your account to meet your expenditure or you can decide to decrease your expenditure so that it is more in line with your income to prevent you going overdrawn and incurring unnecessary bank charges and interest. If you have surplus cash in your account, you can make decisions about spending more in the future or investing some of your cash to provide you with additional income each month. |
| and control purposes | Your bank statement enables you to control your income and expenditure and to compare this with what you expected to happen in your account over the past month: were your income and expenditure in line with your expectations of what you would receive and spend in the month or were they different? If they were different, how were they different? Will any increased income or expenditure recur next month? In these ways, your bank statement helps you to control your money and the inflow and outflow of cash each month. |
By checking your bank statement/online transactions each month, you are keeping track of your cash, monitoring income and expenditure, ensuring that your expenditure is in line with your income, and planning how to increase your income or reduce deficits. This is exactly the role accounting performs in a business context.