0.1What is accounting for?
The essentials in 30 seconds
- Record, report, decide: accounting tracks transactions, produces the balance sheet and income statement, and helps steer the business.
- General = compulsory and standardised (global view for outsiders); cost = optional and free-form (costs, profitability by product).
- Reflex: it is a dashboard, not a mere obligation — it tells you whether you really make money.
Running case — Rachid discovers his real figures
Rachid, who runs a trading SME in Algiers, sells well but does not know what he earns: his accountant shows him the balance sheet and the income statement, then together they isolate the margin of two product families. For the first time, Rachid sees which sales pay and which drag him down — and decides what to push.
This same case runs through the lesson, the diagram, the script and the 48h challenge — and continues in 0.2, 0.3 and 0.4.
1. The language of numbers
Accounting is the language of numbers of a business. It fulfils three roles: record (keep a faithful trace of the transactions), report (produce the balance sheet and income statement for the partners), help decide (provide information to steer the business).
2. General vs cost accounting
General accounting (financial) is compulsory and standardised: it produces the accounts intended for outside parties (tax authorities, banks, shareholders).
Cost accounting (management accounting) is optional and free-form: internal use — knowing the cost of a product, the profitability of an activity.
3. A steering tool
Accounting informs many stakeholders (managers, shareholders, banks, tax authorities, investors).
This guide covers both branches, from the fundamentals up to financial analysis, management control and taxation. Understanding it means understanding how a business really works.
🔎 Concrete example — 🔎 Concrete example — Two kinds of accounting, two questions
What each one answers.
General: « The company made €50,000 profit » (global view, standardised).
Cost: « Product A is profitable, Product B loses money » (internal).
→ the two complement each other.Result: a clear view of both branches and of their use.
Reflex: accounting is not just an obligation, it is a dashboard.
Section vocabulary
- Accounting
- System for recording and summarising a business's transactions, expressed in monetary units.
Simple example: Rachid records every sale and purchase of his trading SME in Algiers.
What it is not: a simple cash notebook with no summary or year-end documents.
Reflex: ask “where is the written trace of this transaction?”.
- General accounting
- Compulsory, standardised accounting producing the accounts for outsiders (tax authorities, banks, shareholders).
Simple example: The balance sheet and income statement Rachid shows his bank.
What it is not: the internal margin calculation per product (that is cost accounting).
Reflex: general = global, standardised view for outsiders.
- Cost accounting
- Management accounting, optional and free-form, for internal use (costs, profitability, steering).
Simple example: Rachid isolates the margin of each product family with his accountant.
What it is not: an official document required by the authorities.
Reflex: cost = by product or activity, for internal decisions.
- Annual accounts
- Summary documents produced at year-end: balance sheet, income statement and notes.
Simple example: At year-end, Rachid receives the balance sheet, income statement and notes.
What it is not: the daily sales register (that is a book, not the annual accounts).
Reflex: at year-end: balance sheet + income statement + notes, all three together.
- Stakeholder
- Party interested in the accounts: manager, shareholders, banks, State/tax authorities, employees, suppliers, investors.
Simple example: Rachid's bank reads his accounts before granting an overdraft.
What it is not: a passer-by with no link to the business.
Reflex: list who reads your accounts and what each looks for.
In practice — In practice — Grasp the roles of accounting
- Remember the three roles: record (track transactions), report (summary documents), help decide.
- Identify the recipients of the accounts: managers, shareholders, banks, State/tax authorities, investors.
- Distinguish general accounting (compulsory, standardised, external) from cost accounting (optional, free-form, internal).
- Spot what this guide covers: from the fundamentals to financial analysis, management control and taxation.
Ready-to-say script — asking your accountant for a dashboard (1 min)
“I want to steer, not just comply. Can you show me this month: my profit, where my expenses go, and the margin of my two product families? Let's make it our 30-minute monthly review.”
Say it to your accountant: move from obligation to steering, with a monthly meeting booked.
Copy-paste template — my three roles this month
RECORD (transactions tracked?): _______________
REPORT (to whom: bank, shareholders?): _______________
DECIDE (1 decision made thanks to figures): _______________
GENERAL (global view): _______________
COST (by product / activity): _______________Small business / tight budget
No costly software needed: a monthly spreadsheet is enough — sales, purchases, expenses, cash — reviewed with the accountant each quarter.
Algerian SME
Rachid tracks his figures with his accountant: a monthly review of margin by product family and cash before any purchase or hiring decision.
Founder just starting
From month one, separate personal and business money and track every transaction: the good habit costs less than catching up later.
Bank loan application
The bank reads the balance sheet and income statement: arriving with clean accounts and an explained margin changes the meeting's outcome.
✓ Best practices
- See accounting as a dashboard, not just an obligation.
- Distinguish the global view (general) from the analysis by product/activity (cost).
- Rely on a chartered accountant for the standardised part.
✗ Common pitfalls
- Reducing accounting to a tax obligation (you lose its steering value).
- Confusing general accounting (external) with cost accounting (internal).
- Steering without a compass by not knowing your figures (margins, cash).
Key takeaways
- Accounting records the transactions, reports (balance sheet, income statement) and helps decide.
- It informs many stakeholders: managers, shareholders, banks, tax authorities, investors.
- General accounting: compulsory, standardised, outward looking.
- Cost accounting: optional, free-form, for internal use (costs, profitability, steering).
48h Challenge — apply tomorrow
Ask your accountant for 1 steering figure (this month's profit or a product's margin) and note 1 decision it inspires. 20 minutes is enough.
- I can name the three roles without hesitating.
- I can tell general (external, standardised) from cost (internal, free-form) accounting.
- I have identified 1 steering figure with my accountant.
Frequently asked questions
Isn't accounting just an administrative and tax obligation?
That is a reductive and costly view. Admittedly, general accounting meets legal and tax obligations — but reducing it to that misses its immense steering value. Well-kept and well-read accounts let you know whether the company is really making money, where the expenses go, whether cash will hold out, which products are profitable, whether you can invest or hire. Many businesses fail not for lack of turnover, but for not knowing their own figures. Accounting is the company's dashboard: merely enduring it is depriving yourself of a major decision-making tool; understanding it is steering instead of flying blind.
What is the concrete difference between general and cost accounting?
General accounting answers "what is the company's overall situation?": it produces standardised and compulsory accounts (balance sheet, income statement) intended for outside parties (tax authorities, banks, shareholders). Cost accounting answers "where do we make or lose money, internally?": it breaks costs and margins down by product, activity or customer, freely and for internal use. Example: the general view says "€50,000 profit"; the cost view says "Product A is very profitable, Product B loses us money". The former is an imposed and global framework, the latter a made-to-measure management tool. The two complement each other (cost accounting especially at level 4).
What are the three roles of accounting?