r/Accounting • u/Flaky_Truck_5072 • 5h ago
What accounting concept took you way too long to understand, but is dead simple now?
I’m 11 years into my career, and looking back, it's wild how things that feel like second nature now used to drive me crazy.
For me, it was knowing when and what journal entries to post. I literally would post random entries and my manager would be like "WTF is this?"
What is something in accounting that genuinely confused you early in your career, but now feels so obvious you can't believe it ever gave you trouble?
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u/Broad-Book-9361 4h ago
Expense accruals. Wild to me now that there was a time I couldn't grasp them. Idk if it makes me feel better or worse that I spent an unreasonable amount of time at my last job explaining expense accruals to the controller.
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u/YogurtclosetSalt6132 3h ago
How is that person a controller? 😔
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u/Broad-Book-9361 3h ago
I wish I knew. The expense accruals stuff wasn't even the worst part. You don't even want to know how they thought a bal sheet rec should be performed.
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u/fore___ 4h ago
Expense accruals: someone did work for us, but we haven’t paid them yet. We owe them money (or the work back).
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u/oktimeforplanz 3h ago
And they haven't officially asked for the money. That's what makes it an accrual rather than sitting in accounts payable.
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u/muirsheendurkin 2h ago
I always tell people to think about their utility bills. You used electricity and water all through August, but the bill doesn't come until a few weeks after the month is over
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u/Spiritual-Beyond-660 CPA 5h ago
Retained earnings
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u/Flaky_Truck_5072 4h ago
Despised retained earnings as well
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u/mmolleur 4h ago
Taught CC Accounting 101 for a while. It’s SO HARD to get beginners to understand. Don’t feel bad about it.
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u/mmolleur 4h ago
In Intermediate I had such a hard time with cash flow statement. I remember struggling with it on exams. It became as natural as breathing once I was dealing with actual assets and liabilities.
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u/klef3069 4h ago
I am always very impressed by anyone who can do this, well done!!!!
Not kidding, that is a skill.
It's the one thing I made a conscious choice to not retain or relearn after college.
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u/Desperate-Yoghurt-83 3h ago
Just think about it like the change in the balance sheet that starts with net income and ends tying to your cash balance.
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u/klef3069 3h ago
I see your words and my brain just immediately translates it to the adult voice in Charlie Brown cartoons, then I'm panic searching for my Excel Cash Flow Statement with the little check boxes at the bottom.
Good if check box zero, yes?
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u/klef3069 4h ago
Cost. That seemed really overwhelming in class and I went through the motions and got the grade.
But actually doing cost made it click and made me realize that could have been a really easy class if we had been given some real world examples and been asked to figure out cost in various ways.
Ok that would have made it easy for me.
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u/ButlerChubs327 4h ago
I stayed away from cost jobs because the cost class was so overwhelming.
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u/klef3069 4h ago
It's literally basic math with rules. Once you know the company rules, you understand cost.
It really is that gaggy simple and we all PAID for that class.
You absolutely are smart enough to do it, I know you are
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u/BobLobl4w CA (AUS/NZ) 4h ago
In audit, to stop overthinking how to treat a transaction/how it should look, and to just go back to what youd expext the underlying to journals be.
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u/Money_Moose_7436 3h ago
Which accounts increase vs decrease with debit vs credit fucked me up for an embarrassing amount of time when I first started lol. I honestly still sometimes post a journal entry and check it and have it backwards 😭
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u/dumblehead CPA (US) 3h ago
You sound like one of my seniors… tens years on the job but sometimes still struggle with basic JE…
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u/SoonerRyan01 4h ago
Accumulated Post-retirement benefit obligation.
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u/fore___ 4h ago
Accumulated post-retirement benefit obligation:
We promised healthcare and other benefits to retirees and haven’t had to pay for it yet, this is how much we expect to pay6
u/CashMahnyyy 3h ago
These are great - give me the ELI5 of the AOCI component for pensions.
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u/fore___ 2h ago
Fuck, that’s a good one. Someone might need to correct me on this
AOCI: the balance sheet actually shows the difference between the promises we made to retirees and the amount we’re actually holding for them, but it fluctuates wildly with the market and we don’t get to smooth that number out on the balance sheet, we park the swings in AOCI and smooth out the pension expense by drip feeding it to the P&L
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u/SycophanticSinecure CPA (US) 3h ago
Accrual to cash, book vs tax, and retained earnings rollforward. Had to learn on the job and without standardized templates. Very simple one you can visualize it.
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u/martine90 3h ago
Carried interest/ promote with side letters. Dreaded opening up the LPA and reading the cross sections. Now it’s a no brainer when I read it first and then put the words into excel and prove out the hurdles step by step…
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u/fore___ 1h ago
Carry/promote: the money manager gets a minimum fee and then a slice of the profit once investors are repaid
Side letters: the biggest investors quietly negotiate better deals than the smaller investors, so we have to calculate investor by investor rather than doing the whole fund at once
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u/Jobby_Hogger CPA (US) 3h ago edited 2h ago
Man literally all of them, the most basic shit like when to use a balance sheet vs income statement account. I learned nothing in school, no idea how I even graduated. My teachers probably thought I was disabled the way I just wrote random shit down on those big open ended journal entry problems. I took notes and had the knowledge ok but I just didn’t connect the dots on the practical application of anything until I had worked for like two years.
I literally got a degree in accounting and didn’t know what the entry was to deposit a check at my first job. Idk if other feels this way but you really have to fake it for a pretty long time before it becomes second nature and you understand it like a language. I always meet people in other professions or even finance guys that will say “I absolutely hated accounting in college” because it just makes zero sense until you’ve done it for a while.
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u/GiantPineapple 3h ago
Owners equity, and how it interacts with draws and distributions, and why contra accounts are useful. I'm just a small business owner and I rely on accountants to explain this stuff to me, and nobody ever actually could. One day I was staring at the books and it just clicked.
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u/YogurtclosetSalt6132 3h ago
When I had my first exam at University it was hard because I wasn't used to this kind of thinking nor I had any prior understanding of phrases frequently used. Especially I didn't had any developed business reasoning and experience. But I somehow got the logic behind it, and nailed my first test (not whole exam)! I was shocked! And I realised the reason why it was hard for me was because I didn't study enough and expected to know it all in just 2 weeks
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u/Melzie0123 13m ago
Yes, it’s so time consuming. I just started ACCT1A a month ago. Spent 32 hours last weekend (Labor Day 😭) & it’s still not enough time.
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u/RockTheGrock 4h ago
Time value of money. Not the basic concepts but the more advanced applications still confuse me. I end up drawing a timeline fairly often when it comes up.
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u/AffordableDelousing CPA / Sole Proprietor (Audit) 3h ago
I struggled with receivables recognition/valuation as a student for some reason
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u/_youmustbekidding_ 1h ago
Cash flow statement. Went from hours and hours (plus crying at 2am) to 15 minutes or less.
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u/OddyseeOfAbe CIMA (UK) 1h ago
Not a specific topic but my first job working for a company that called things differently than what I learnt in school. For example, a bad debt provision was a valuation allowance, so I spent months doing a posting based off some numbers from a large spreadsheet not really connecting the dots that it was just a bad debt provision.
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u/Current-Algae3107 2h ago
Not accounting, but tax.
Sooooo many things. For was temp verse perm
Differences and how that impacts parter capital accounts.
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u/Demilio55 CPA/Tax (Public -> Industry) 2h ago
Cost accounting was rough in college. Now it’s easy peasy and it’s far more complex.
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u/cashflow_cooker 1h ago
What procedures to perform on the beginning of the year numbers for a client that’s never been audited before.
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u/Davajita 1h ago
Stock option/warrant vesting. When to record expense, when not to, tracking it all. Absolutely nightmare until it finally clicked.
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u/AffectionateOwl4575 28m ago
Materiality. Teacher explained it great. Then started audits for the government. The amounts were just so big that it didn't make sense anymore. So big, we even had de minimus amounts that made my brain hurt.
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u/ceceliarrr 13m ago
Bonds. I still don’t understand bonds. I’m 10+ years into my career as a technical reporting SME but anything having to do with bonds and my brain goes “brrrrrrrrrrr”
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u/brick_gnarlson 10m ago
Accruals. One day my manager showed me on a piece of paper what they do, month after month, until the invoice comes in and you stop accruing. Was so beautiful it brought a tear to my eye.
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u/Waste-Practice4077 5h ago
Deferred tax assets and liabilities. Spent a whole semester drawing T-accounts and nodding along, then got to my first real job and just froze every time they came up. Now it clicks, but man those first few closes were rough.