Accountant Isekai

"There are four financial statements," I said.

I held up four fingers.

"There's an option for five statements, but we'll get to that. First, we have the Statement of Financial Position. This is what the organization issuing the statement is like at the moment it's issued. To make things simple, it's divided into 3 sections: what the organization has, what it owes to other people, and what the owners of the organization own. What the organization has is always equal to what it owes plus what the owners own."

"What if they aren't equal?" Astrid asked.

"There's either a calculation mistake, something illegal is happening, or someone's manipulating the records. Typically, someone manipulates records to cover up something illegal happening," I explained.

Johannes contemplated things.

"How often do companies have to issue this?" he wondered.

"At least once a year. Some places might have laws that say they have to issue them more often. It's the same with the other financial statements," I said.

I waited a moment to give everyone time to ask questions. When no one spoke, I moved on.

"The second financial statement is the Statement of Profit and Loss and Other Comprehensive Income. These can be combined into one financial statement, or they can be two different financial statements."

Joanna nodded.

"I think I understand. This is what an organization made or lost, correct?"

"Yes. Think of it as all the money and expenditures they made. The Statement of Other Comprehensive Income is all the forms of income that don't count as profit and loss under my old homeland's accounting rules. That's why it can be issued as a second statement," I explained.

"And what counts as profit and loss?" Joanna asked.

"That is way too complicated to get into right now. There are a lot of rules about it. Right now, just think of profit and loss as normal things and other comprehensive income as unusual things," I said.

She thought a moment.

"Do you intend to introduce all these rules to this world?" Joanna questioned.

"Not all at once, but a little bit by bit. Right now, just the basics of the financial statements should be fine. I'll keep things simple and clear," I stated.

Then, Astrid spoke up.

"Will this help with taxes?" she asked.

"To an extent, but companies do different bookkeeping in my world for taxes. Tax laws never fully line up with accounting standards. Some countries try to make them line up as much as possible, but there's always at least a few differences."

"Why not just make them line up all the way?" Astrid wondered.

"Two reasons. The first is that my old homeland's standards are meant to apply internationally. Different countries will have different tax laws. And for standards that are made for just one country, they have a different purpose than tax rules. Tax rules are for finding out how much money you owe the government. Accounting standards are supposed to give people information they need about your company."

I stopped for questions again. Once more, there were none.

"Next up is the simplest statement: the Statement of Changes in Equity. Basically, you write down all the things that changed what the owners of the organization own. So, if the organization earned or lost money, that changes it. If people bought stock, that changes it."

"That makes sense," Johannes nodded.

"Any questions?" I asked.

No one said anything.

"Alright, time for the final statement: the Statement of Cash Flows. This statement shows how money goes into and out of the organization," I explained.

Confusion crossed everyone's faces.

"Hold on. Doesn't the Statement of Profit and Loss already do that?" Astrid questioned.

"No. This is where we get into the cash and accrual accounting. This is probably the biggest reason you can't use the same systems for taxes and accounting. For taxes, the government only cares about whatever you're paying taxes in and how much of it you have, to simplify things," I said. "As a noble, I'm part of the government, so I know."

Joanna nodded.

"We care about the amount of crops harvested when we're taking peasants, but what else is there that people need to know economically?" she asked.

"Let me give you an example. Let's say that someone does a job for someone but won't get paid for it for a while. As far as the government's concerned, the amount they're going to get paid doesn't matter until it's paid. But people outside the government might want to know if a company's getting money in the future," I explained.

Looks of realization crossed over everyone.

"That makes perfect sense," Johannes said.

"And it's just one example. Now, we have the Statement of Cash Flows in addition to the Statement of Profit and Loss because knowing what cash is going into and out of a company is important for normal people involved with a company to know too," I stated.

Full comprehension crossed over everyone.

"And those are the financial statements," I concluded.

"You want to introduce these to this world?" Astrid asked.

"Yes. I'm going to talk to the Dark Elves about them. They'll be key to negotiating."

Joanna nodded.

"The Dark Elves won't like it if they find out that you're making a deal with them so we can trade with the High Elves," she said. "They've hated each other ever since the schism."

"When they find out, not if. We can't hide this from them forever, so if they ask why we want the mushrooms, I'll just tell them," I stated. "Which is why I think we need something extra to convince them. Agreeing to give the Underground Elves financial statement information on our traders might help convince them to trust our trade deal. And the Dark Elves will probably want to make their own guilds and traders issue the financial statements."

"Which means we can use it as another bargaining chip," Joanna replied.

I nodded.

"Exactly."

Johannes paused for a moment in thought. Then, he spoke.

"Gustav, how hard is it going to be to get everyone to use these statements?" he asked.

"Implementing the financial statements for everyone, with our level of technology and magic, is almost impossible. But it won't be for everyone. Even in my world, it was just for companies that publicly traded stock. It should be fine if just major guilds and major trade organizations have to issue them," I said.

Then, I pulled out my crystal ball.

"But as these get more common and better, we'll be able to expand the people who use financial statements. Both people who read them and people who produce them. The only thing I'm not sure about is how many organizations should be required to issue financial statements. There aren't any corporations in this world, so I'm not sure where the line should be drawn."

"You might want to talk to a few monarchs about that," Joanna stated.

I nodded.

"If financial statements help out in Greenrivers on their current scale, more monarchs might want to implement them. We might even set up a board like IASB. But all that's in the future. It'll be a while before crystal balls get good enough to expand who issues financial statements beyond major groups," I said.

Then, I saw that Astrid and Johannes were in deep contemplation. I walked over to them.

"Do you have any questions about the financial statements or anything?" I asked.

"No," Johannes answered. "I was just wondering why the High Elves and Dark Elves had a schism. I was never told."

"Same. Motteburh doesn't really care about teaching bastard children elf politics," Astrid said.

"The schism is simple: the High Elf leaders decided to make doing drugs mandatory," I replied.

Shock coated their faces.

"Mandatory? Why?" Johannes wondered.

"Wouldn't that cripple their armies' ability to fight?" Astrid questioned.

"It would," I said.

I turned to Joanna.

"Joanna, do you have any idea why the fuck the High Elves made drug use mandatory?" I asked.

"No," she answered.

"Dʰéǵʰom, do you know why?" I thought.

The god sighed.

"You know how religious people try to force other people to worship the same way they do?" he questioned.

"Yes."

"Think that except replace religion with drugs."

"That explains why the Dark Elves became so religious," I thought. "But why did they call themselves the Dark Elves? That's a pretty evil-sounding name."

"It's meant to be descriptive. They live underground, which is dark. And their skin somehow became darker despite living underground where there's no sunlight. Even I don't know how that happened."

Considering how religious wars weren't a thing in this world, I translated things a bit when I relayed this to the others.

"The High Elves that didn't want to do drugs split off from them and became the Dark Elves," Astrid nodded with comprehension.

"That explains why every single High Elf is a junkee," Joanna sighed. "And the Sea Elves directly came from the Wood Elves like the High Elves did."

I hoped that this information would help us in some way. We'd be underground soon enough.