Pounds Sterling (Photo credit: 917press)
I work in an accountancy firm. I’m not an accountant, and I don’t mix with accountants that much, but I’ve had to learn about accountancy. It’s basically maths minus all the logic and plus a whole bunch of complexity to stop ‘normal’ people being able to do it.
In particular there’s one accounting concept which frustrates me: materiality. Materiality states that providing real life is no more different than a set amount from financial reports, there’s no point worrying about it. In other words, if I tell you that I have £1,000 but I actually have £900, providing materiality is 10% or more I’m effectively telling the truth.
This is for risk management purposes so is generally fine, but £100 is not an insignificant amount.
Nor, actually, is £1.
If two people earned £50 today and Person A spent £49.50 then they’ve got 50p profit, but if Person B spent £50.50 then they’re in minus numbers.
£1 might not sound like that much of a difference on its own, but over a year Person A will have almost £200 to spend on a special treat, while Person B will be stuck searching for that much.
Charles Dickens knew this when he wrote David Copperfield, and I think we’d do well to take his thoughts on board:
Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.
