Costs, profits, losses
Suppose that one hot summer afternoon you decide to go into business
selling glasses of cool lemonade to thirsty people. It would be fun, of
course, but you would probably also hope to make some money—a profit.
An accountant uses arithmetic to keep track of money that is made and
spent by a business, government, bank, or other organization.
In order to start your lemonade business, there are some things you
would need to know. First, how much should you charge for a glass of
lemonade? Can you just make up a price?
In a real business, an accountant (uh [kown]{.smallcaps} tuhnt) helps to
decide the prices of things, and figures out if a profit is being made.
Most of an accountant’s work is done with arithmetic.
If an accountant were to figure out things for your lemonade business,
he or she would probably first find how much you will have to pay for
the lemons and sugar, or the lemonade mix, that you’ll need to make the
lemonade. The cost of the material is one of the things you need to know
to decide what the price of a glass of lemonade should be.
If it costs sixty cents to make just enough lemonade for ten glasses,
the accountant might tell you to charge at least fifteen cents for a
glass. That way, you need sell only four glasses to get back the cost of
your materials—the sixty cents worth of lemons and sugar, or the
lemonade mix. Every glass you sold after that would be profit.
If you sold all ten glasses, the accountant would tell you that you had
made a profit of ninety cents! But if you sold only three glasses, the
accountant would say that your business showed a loss of fifteen
cents—because you didn’t sell enough lemonade to get back the sixty
cents the materials cost.
That’s the sort of work accountants do. But in the world of big
business, their work is much more complicated. They must often keep
track of millions of dollars! A real business couldn’t get along
without an accountant.
