Why knowing about the fundamentals of accounting is a good tool to have?

Accounting is pervasive in life. Understanding basic accounting concepts is valuable because they help make financial decisions. We use those concepts in making major decisions such as buying a home and signing a mortgage, buying insurance, investing in stocks and bonds, opening a bank account, accumulating a retirement plan, and many other major transactions. It is important to understand the concepts of assets, liabilities, and capital and to know that when we buy a car or a piece of equipment we are exchanging one asset for another, not incurring an expense. The expense comes from operating the car or equipment. We need to understand that when we make a mortgage payment only part of it is interest expense and part increases our equity in the house. We need to know what it means when the bank sends us a debit memo for our checking account. We need to be able to read the balance sheet and income statement of a company whose stock we own. And we need to be aware of the weaknesses in those reports caused by the accounting system in use. We need to know what we are getting when we buy a term life insurance policy rather than a whole life policy with a built-in savings feature. We need to understand what it means to ear a rate of return, what a dividend is, and how to decide if we should invest in a stock, bond, or business.A knowledge of accounting helps us in all those situations.