A very interesting framing of accounting by John Collison:
Patrick: I’m curious to hear your thoughts on accounting and its need to change.
John: If we imagine we’re the product manager for accounting. Let’s imagine we’re just hired by the agency that manages GAAP — the accounting principles.
Like any good product manager we start with, “Okay, well, what are the jobs to be done here? Who’s our target customer or target persona?” And it’s interesting to think about.
We’re actually trying to do a number of different jobs with accounting:
- We’re trying to figure out how much profit we earn so we know how much tax we have to pay. That’s one job we have.
- We’re also trying to help the business run itself. We’re trying to provide a view of the business to managers so that we can determine whether we need to invest in new machinery to be more efficient or something like that.
- We’re also trying to solve for the needs of creditors, where people want to be able to evaluate the business and understand will it have enough money to pay off its debt.
- We’re also, importantly, trying to solve for the needs of equity holders, where they’re trying to understand what are the long term cash flows for this business going to be.