What is Accounting & Why It Matters

Meera stepped off the bus at Haldwani bus stand, her backpack heavy with notebooks and a water bottle. She had a printed letter in her hand — an offer to join Sharma Sir's CA office as a trainee. She didn't know what a CA actually did all day. She didn't know what "accounting" really meant. But her father had said, "Meera, yeh seekh lo toh naukri pakki hai." So here she was, walking down a narrow lane behind the market, looking for a small blue board that read: V.K. Sharma & Associates, Chartered Accountants.

Meera's First Morning

Meera found the office on the first floor above a stationery shop. It was a small room with three desks, a printer, and shelves full of thick files. A ceiling fan wobbled slowly.

A young man looked up from his computer. "You must be Meera? I'm Negi. Come, sit here. Sharma Sir will be in by 11."

Meera sat on a plastic chair and looked around. Numbers. Numbers everywhere. Printouts taped to the wall. A calendar with tax dates circled in red. Stacks of paper with rows and columns.

"Negi Bhaiya, what is all this?" she asked.

Negi smiled. "This? This is accounting. Every number here tells a story about someone's business — how much they earned, how much they spent, how much tax they need to pay."

Meera blinked. "But... isn't that just writing down numbers?"

Negi shook his head. "That's what most people think. But there's a big difference between writing down numbers and doing accounting. You'll understand soon."

What is Accounting?

At 11 o'clock sharp, Sharma Sir walked in. He was a tall man with silver hair, reading glasses on a chain around his neck, and a calm smile. He carried a steel tiffin box and a newspaper.

"Ah, Meera! Welcome, welcome. Sit, sit. Negi, chai lao."

After the tea arrived, Sharma Sir pulled his chair close.

"So, Meera. Tell me. Do you keep track of your own money?"

Meera thought for a moment. "Yes, Sir. When Papa gives me money for the month, I write down what I spend — bus fare, notebooks, food."

"Good! That little notebook of yours — that is the beginning of accounting. You are keeping a record of money coming in and money going out."

He picked up a pen and wrote on a piece of paper:

Accounting = Keeping a complete, organized record of all the money that comes into a business and all the money that goes out — so that you always know where the money is and how the business is doing.

"That's it?" Meera asked.

"That's the heart of it," Sharma Sir said. "But the key word is organized. Anyone can scribble numbers in a diary. Accounting means recording them in a systematic way — following certain rules — so that the information is useful."

Your Personal Khata vs a Business Khata

Sharma Sir leaned back. "Meera, your personal notebook where you write expenses — that's your personal khata. It works for you because your life is simple. You have one source of money: Papa. You have a few expenses: bus, food, books."

"But a business? Even a small kirana shop? It has hundreds of things happening every day."

He counted on his fingers:

1. Buying goods — The shop buys rice, dal, soap, oil from different suppliers.
2. Selling goods — Customers buy things every hour.
3. Paying bills — Electricity, rent, phone.
4. Giving credit — Some customers say "likho, baad mein dunga" (write it down, I'll pay later).
5. Taking credit — The shop owner buys goods from a wholesaler and says "next week payment karunga."
6. Paying salaries — If there is a helper in the shop.
7. Paying taxes — GST, income tax.
8. Taking loans — Maybe from a bank to expand the shop.

"If you just scribble all of this in one diary with no system, you will get lost in a week," Sharma Sir said.

"So accounting is like my personal notebook," Meera said slowly, "but with rules, and for a business."

"Exactly right," Sharma Sir said.

The Torn Notebook — Rawat Aunty's Visit

Just then, the office door swung open and a woman walked in, slightly out of breath. She wore a simple salwar-kameez and carried a cloth bag.

"Sharma ji! I need help. The bank is asking for my accounts. I don't have any accounts. I have this."

She pulled out a battered notebook from her bag. The cover was torn. Pages were falling out. Some entries were in pencil, some in pen, some in blue ink, some in red. Dates were missing. Names were abbreviated. Some pages had tea stains covering the numbers.

This was Rawat Aunty — she ran Rawat General Store, a kirana shop in Almora.

Sharma Sir opened the notebook gently. "Rawat ji, let me see..."

He turned a few pages and read aloud:

• "Ramesh — 500" (Who is Ramesh? 500 for what? When?)
• "Oil — 2000" (Which oil? Bought or sold? From whom?)
• "Cash — 15000" (Cash came in or went out? On which date?)

Sharma Sir sighed kindly. "Rawat ji, I understand. You've been writing things down. That's good. But this is not accounting. This is just... notes. Let me show you the difference."

He called Negi over. "Negi, show Rawat ji the ledger for Bisht Traders."

Negi opened his computer and turned the screen toward Rawat Aunty. On it was a clean, organized table:

Rawat Aunty stared. "This is so clean. I can actually see what's happening."

"Yes," Sharma Sir said. "At any point, you can tell how much money you have. You can tell who owes you money. You can tell whom you owe money. You can tell if your business is making a profit or a loss."

"And this," he said, pointing at Rawat Aunty's torn notebook, "tells you nothing."

Rawat Aunty looked embarrassed. "But I'm just a small shopkeeper..."

Sharma Sir held up his hand. "Even the smallest shop needs proper accounts. Let me tell you why."

Why Even a Small Kirana Shop Needs Accounting

Sharma Sir poured more tea and settled in. Meera took out a fresh notebook to write everything down.

"There are five big reasons why every business — even a tiny one — needs to keep proper accounts."

Reason 1: Know if You Are Making Money or Losing Money

"Rawat ji, tell me honestly — is your shop making a profit?"

Rawat Aunty hesitated. "I think so... I mean, there is money coming in every day..."

"But do you know how much you spend every month? On buying stock, on rent, on electricity, on transport?"

She shook her head.

"Without proper accounts, you might FEEL like you are making money, but actually be losing money slowly. Many small shops close because the owner never realized they were spending more than they were earning."

The danger of no accounts: A shopkeeper in Pithoragarh once told Sharma Sir that his business was "going well." When they sat down and calculated properly, they found that the shop had been losing ₹3,000 every month for two years. The owner had been slowly spending his own savings without realizing it.

Reason 2: Get a Bank Loan

"You came to me today because the bank asked for your accounts. Banks need to see your accounts before giving a loan. They want to know: Is this business healthy? Can this person repay?"

"Without proper accounts, the bank cannot trust you. Your loan application will be rejected."

Reason 3: Pay the Right Amount of Tax

"The government collects tax from businesses. If you don't keep records, two things can happen:"

1. You pay too much tax — because you can't prove your expenses, so the government assumes you earned more than you did.
2. You pay too little tax — by mistake, and then the government charges you a penalty (extra money as punishment).

"Both are bad. Proper accounts mean you pay exactly the right amount. Not one rupee more, not one rupee less."

Reason 4: Keep Track of Udhar (Credit)

"Rawat ji, how many customers owe you money right now?"

Rawat Aunty thought hard. "Maybe... fifteen? Twenty?"

"How much total?"

"I... I'm not sure."

"See? You have given goods on credit to people and you don't even know how much they owe you. That's YOUR money. Without a record, some people will simply forget — or pretend to forget."

Reason 5: Make Better Decisions

"If you keep good accounts, you can answer questions like:"

• Which items sell the most?
• Which month has the highest sales?
• Am I spending too much on transport?
• Should I stock more of this item or less?

"Accounting gives you information. Information helps you make decisions. Good decisions help your business grow."

Rawat Aunty nodded slowly. "Sharma ji, I understand now. But where do I start?"

Sharma Sir smiled. "Don't worry. We'll help you. In fact, Meera here is going to learn accounting step by step. And as she learns, we'll organize your books too."

He turned to Meera. "Meera, you've just heard your first lesson. Let's make sure you understand it properly."

Writing Down Numbers vs Real Accounting

Meera had been scribbling notes furiously. Sharma Sir noticed and said, "Good. Now let me make the difference very clear."

"Think of it like this," Sharma Sir said. "You know how doctors write prescriptions?"

"Yes, in that terrible handwriting," Meera laughed.

"Exactly. But even though the handwriting is bad, every pharmacist in India can read it. Why? Because it follows a system. The drug name, the dosage, the frequency — it's always in a certain format. That's what accounting does for business numbers. It creates a system that everyone can follow."

What Happens When You DON'T Keep Accounts

Sharma Sir became serious. "Let me tell you some real problems I've seen in my thirty years as a CA."

Problem 1: Tax Notices and Penalties

"A shopkeeper in Rudrapur never kept any records. One day, he got a notice from the Income Tax Department. They estimated his income at ₹12 lakh and demanded tax on that amount. His actual income was only ₹4 lakh — but he had no records to prove it. He ended up paying tax on ₹12 lakh plus a penalty."

Problem 2: Loan Rejection

"A woman in Kashipur wanted to expand her tailoring business. She went to the bank for a ₹2 lakh loan. The bank asked for her accounts. She had nothing. Loan rejected. She had a good business, but she couldn't prove it on paper."

Problem 3: Partnership Fights

"Two brothers ran a hardware shop together in Ramnagar. No proper accounts. After five years, they fought bitterly. One said 'I put in more money.' The other said 'No, I did.' There was no record. The family was torn apart."

Problem 4: Invisible Theft

"A shop owner in Haldwani had a helper who was stealing ₹500 every day from the cash box. Without accounting, the owner never noticed. It went on for two years. That's ₹3,65,000 lost."

Problem 5: Business Failure Without Warning

"A restaurant owner thought his business was doing great because customers were always coming in. But he never tracked his expenses properly. By the time he realized he was spending more than earning, he was already ₹5 lakh in debt."

Meera looked at Rawat Aunty. Rawat Aunty looked worried.

"Don't worry," Sharma Sir said gently. "These problems happen when there is NO accounting. That's exactly what we are here to fix."

Accounting is a Language

Sharma Sir stood up and walked to the whiteboard on the wall.

"One last thing for today, Meera. I want you to think of accounting as a language."

"Hindi is a language. English is a language. And accounting? It is the language of business."

"Just like Hindi has grammar rules — subject, verb, object — accounting has rules too. Just like you learn Hindi words one by one as a child, you'll learn accounting words one by one."

"And just like knowing Hindi helps you talk to people across India, knowing accounting helps you understand any business anywhere in the world."

He wrote on the whiteboard:

Accounting = The language of business. It tells the story of a business in numbers. Anyone who knows this language can read any business's story.

"A shop in Almora and a company in Mumbai — both use the same accounting rules. That's the beauty of it. Once you learn this language, you can work anywhere."

Meera smiled for the first time that day. She could learn a language. She had learned Hindi and English. She could learn this too.

Meera's Task for the Day

Before Rawat Aunty left, Sharma Sir gave Meera her first task.

"Meera, I want you to sit with Rawat Aunty for ten minutes. Look at her notebook. Try to list all the things that are wrong with it. What information is missing? What would make it better?"

Meera sat with Rawat Aunty and examined the notebook page by page. After ten minutes, she had a list:

1. No dates on many entries — you can't tell when something happened.
2. No full names — just "Ramesh" or "oil." Who is Ramesh? Which oil?
3. No description — "500" doesn't tell you if it was received or paid.
4. Mixed up entries — buying, selling, expenses, all mixed on the same page with no separation.
5. No totals — the pages just go on and on with no monthly total or running balance.
6. Missing pages — some pages were torn out.
7. Two different handwritings — sometimes Rawat Aunty wrote it, sometimes her son did, in different styles.
8. No distinction between cash and credit — you can't tell if money actually changed hands or if it was udhar.

Sharma Sir read her list and nodded. "Excellent. Every single one of these problems is something that accounting solves. Over the next few weeks, I'll teach you exactly how."

Quick Recap — Chapter 1

What is accounting? — A systematic way of recording all the money that comes into and goes out of a business.

Why is it different from just writing numbers? — It follows rules, has a fixed format, and produces information that anyone can read and understand.

Why does every business need it?

• To know if you are making a profit or loss
• To get bank loans
• To pay the right taxes
• To track who owes you and whom you owe
• To make smart business decisions

What happens without it? — Tax penalties, loan rejection, fights, theft, business failure.

Key idea: Accounting is the language of business. Learn it, and you can work anywhere.

Practice Exercise — Try This Yourself

You don't need a shop to practice. Try this with your own life or your family's small expenses.

Exercise 1: Take a blank notebook. For the next three days, write down EVERY money transaction in your house. Follow this format:

Write at least 10 entries.

Exercise 2: After three days, add up all the "Money In" and all the "Money Out." Find the difference. What does that number tell you?

Exercise 3: Think about a small shop in your town or village. List at least 8 different types of transactions that happen in that shop every day. (Hint: buying stock, selling to customers, paying rent, giving credit...)

Exercise 4: Look at Rawat Aunty's messy notebook (the problems Meera listed). Which of these problems does YOUR notebook have? How will you fix them?

Fun Fact — The World's Oldest Accounts

Did you know that accounting is one of the oldest skills in the world? People in ancient Mesopotamia (modern-day Iraq) were keeping accounts on clay tablets over 5,000 years ago! They recorded how many bags of grain they had, how many sheep they sold, and who owed them what.

In India, Kautilya's Arthashastra (written around 300 BC) has detailed instructions on how a kingdom should keep its accounts. So when you learn accounting, you are learning a skill that is thousands of years old — and still one of the most useful skills on the planet.

And here's the best part: accounting will never go out of demand. As long as people do business, they will need someone to keep their books. That someone could be you.

Tomorrow, Meera will learn about the most basic building block of accounting — the transaction. What exactly counts as a transaction? Let's find out.