Accounting: Turning numbers into clarity, accountability, and confidence.

Think of a university as a busy kitchen: tuition, grants, donations, and state funding are the ingredients, and programs, salaries, and research are the dishes. Accounting is the recipe that keeps everything organized, ensuring the university can serve students, faculty, staff, and the community effectively. In this first article of our new monthly series, we’ll explore the basics of accounting and why it matters - even if you’re not an accountant. Welcome to Part 1!

What Accounting Is (and Why It Matters)

Accounting is a system for understanding how money and resources flow through an organization. In a public university, it helps the University answer three basic questions:

• What resources does the university have?
• What obligations does it owe to others?
• Are resources being used effectively to support the University's mission and strategic priorities?

Many people think accounting is only for accountants. Accounting is used every day by business owners, managers, banks, investors, governments, and universities, to make decisions. In a public university, accounting might seem even more complex, with multiple sources of funds, state appropriations, tuition, research grants, and donor restrictions. But at its core, accounting is much simpler, and much more important than it seems.

Understanding these three questions is like tasting the finished meal. You can see how all the ingredients come together.

Who Uses Accounting Anyway?

Accounting is not just for accountants. In a university, it is critical for:

• Administrators, Chairs, Directors, and department heads to plan budgets and monitor spending
• Executive leadership and the Board of Trustees to assess financial health and strategic decisions
• State and federal agencies to verify compliance with laws, regulations, and grant requirements
• Donors and alumni to ensure contributions are used as intended
• Auditors to ensure transparency and accountability

Accounting Is the Language of Business

Accounting is often called the language of business. That’s because it provides a common way to describe financial activity so everyone can understand it, from university leaders to auditors, and from federal agencies to state regulators. 

Just like a recipe has structure and rules, accounting has its own systems and conventions. But you don’t need to be a master chef, or an expert accountant, to benefit from it. Even a basic understanding allows you to:

• Track tuition, grants, and donations accurately
• Monitor expenses for salaries, maintenance, and programs
• Make informed decisions about budgeting and resource allocation
• Demonstrate accountability to the public, boards, and funding agencies

Without accounting, a university’s finances are like a kitchen full of ingredients with no recipe.

Why the Bank Balance Isn’t Enough

A common misconception is that accounting is just tracking cash. In a university, cash is important, but it’s only part of the picture.

Imagine a university has:

• $10 million in its bank accounts
• $8 million in unpaid invoices to suppliers and contractors
• $5 million in grants received but not yet spent

Is the university financially healthy? You can’t tell just by looking at cash. Accounting brings together all resources, obligations, and restrictions to provide a full financial picture.

Bookkeeping vs. Accounting: What’s the Difference?

These two terms are often used interchangeably, and while they are closely related, they are not the same.

• Bookkeeping is the process of recording transactions. In a university, this might include:
• Recording tuition payments and scholarship disbursements
• Deferred salaries and benefit payments
• Tracking grant receipts and expenses
• Accounting is broader. It involves:
• Organizing and interpreting financial data
• Preparing reports for boards, auditors, and government agencies
• Ensuring compliance with laws and donor restrictions

Think of bookkeeping as gathering the ingredients and accounting as cooking the meal. Both are essential, but accounting gives you the final dish.

Accounting Is About Understanding, Not Just Math

You do not need to be “good at math” to understand accounting. You need to understand how money flows through a business, or in our case, a university, and that starts with learning a few core ideas. Accounting relies on simple arithmetic, addition and subtraction, but the real skill is seeing how everything is connected:

• How tuition revenue and grants fund programs
• How salaries and expenses affect resources
• How obligations and restricted funds must be managed

If you can follow a logical explanation, you can learn accounting, even in a complex university environment.

Why Accounting Exists at All

Universities handle money from multiple sources: tuition, grants, donations, state funding, and auxiliary services. Accounting provides a structured way to capture that information accurately and consistently. Keeping track of all these resources mentally is impossible.

Accounting provides a structured system to track and manage resources, demonstrating:

• Accountability to taxpayers, donors, and students
• Compliance with laws and grant requirements
• Transparency for auditors, boards, and regulators

Trust so banks, investors, and other stakeholders can have confidence in the university’s finances

Without accounting, a university’s finances are like kitchen chaos. Lots of ingredients, but no dish.

What This Series Will Teach You

This series of articles is designed for people with no prior accounting knowledge. You will learn:

• The basic structure behind all accounting
• How different types of accounts work (assets, liabilities, fund balances, revenues, and expenses)
• How inflows and outflows are tracked across different funds
• How day-to-day transactions affect financial records
• How to read and understand basic financial reports

Don’t worry, you will not be expected to memorize complex rules. Each concept builds on the previous one, step by step.

The Most Important Thing to Remember

Accounting is not about perfection. It’s about clarity and accountability.

You don’t need to become an expert to benefit from accounting. You just need to understand the basics well enough to ask good questions, recognize when something doesn’t make sense, and ensure resources are being used properly.

What’s Next?

In the next article, we’ll introduce the single most important concept in all accounting: the accounting formula. Once you understand that, everything else will start to make sense.