Accounting For Dummies®, 4th Edition

16.4. Call the Shots on Accounting Policies

You may have heard the adage that war is too important to be left to the generals. Well, accounting is too important to be left to the accountants — especially when choosing which accounting methods to use. I'm oversimplifying, but measuring profit and putting values on assets and liabilities boils down to choosing between conservative accounting methods and more liberal (or aggressive) methods. Conservative methods record profit later rather than sooner; liberal methods record profit sooner rather than later. It's a "pay me now or pay me later" choice. (Chapter 7 gives you the details on accounting methods.)

I encourage you to get involved in setting your company's accounting policies. Business managers should take charge of accounting decisions just like they take charge of marketing and other key activities of the business. Some business managers defer to their accountants in choosing accounting methods for measuring sales revenue and expenses. Don't! You should get involved in making these decisions. The best accounting method is the one that best fits the operating methods and strategic plan of your business. As the manager, you know the business's operations and strategy better than your accountant.

Many businesses choose conservative ...