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How to Make Use of Accounting in Your Personal Financial Life

A great deal of the information you use in making personal finance and investing decisions is accounting information. You need a basic understanding of accounting terminology and valuation methods in order to make good use of the financial information.

A sizable percent of the populace bash the profit motive and seem to think businesses should not make a profit, however, you have a stake in the financial performance of the business you work for, the government entities you pay taxes to, the churches and charitable organizations you donate money to, the retirement plan you participate in, the businesses you buy from, and the healthcare providers you depend on.

The financial performance and viability of these entities has a direct bearing on your personal financial life and well-being.

All people are affected by the profit performance of businesses, even though they may not be fully aware of just how their profit performance affects jobs, investments, and taxes. For example, as an employee your job security and your next raise depend on the business making a profit. If the business suffers a loss, you may be laid off or asked to take a reduction in pay or benefits.

Business managers get paid to make profit happen. If the business fails to meet its profit objectives or suffers a loss, its managers may be replaced (or at least not get their bonuses).

Your investments in businesses, whether direct or through retirement accounts and mutual funds, suffer if the businesses don’t turn a profit. The federal government and many states depend on businesses making profit so they can collect income taxes from them.

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