Accounting Map

A single diagram that structures accounting concepts and terms so anyone can share a common understanding of accounting.

What is the Accounting Map?

The Accounting Map conveys 15 accounting terms (revenue, expenses, profit, P/L, assets, liabilities, net assets, B/S, cash, cash flow, the three financial statements, market capitalization, goodwill, PBR, and ROE) in a single diagram. With the Accounting Map, you can understand the flow of money in a company and how it affects society. You can also visualize a company's cash flows and, by comparing it with competitors, make its strengths and weaknesses visible.

How the Accounting Map works

What is the Accounting Map?
Accounting Map
A tool for seeing how money flows through a company, and how the company affects society.
It joins the income statement (PL) and the balance sheet (BS) into one diagram, so you can see accounting as a whole. The book The Accounting Map explains 15 accounting terms using only this diagram.
How to read it
It is divided into six blocks
The left and right sides always balance. This is the most important rule in accounting (debits equal credits).
The left is what the company has. The right is where the money came from: money it borrowed, and its own money. The bottom is the year's results: what it spent and what it earned. The difference builds up as profit.
How to read it
A company's money in nine flows
A company raises money, turns that cash into assets, and earns a profit by giving value to customers. Each year the profit goes into net assets, and the company grows.
Every business can be explained by how its money flows. You don't need to learn the terms yet. It is enough to see that all the flows are connected.
(1) Raise money (2) Cash into assets (3) Value to customers (4) Sales arise and become assets (5) Assets into expenses (6) Match sales and expenses (7) The difference is profit (8) Profit into net assets (9) On to the next year
The nine flows
1. Raise money
A company starts by borrowing from a bank and taking investment from shareholders. That money can then be used as cash.
This is one of the financial statements, the balance sheet (BS). The right side shows where the money came from, and the left side shows how it is used. Keeping it as cash is one way of using it.
The nine flows
2. Turn the money into goods
The company uses cash to make goods. Part of the cash is replaced by goods, which are also assets.
What the cash is used for, and which other assets it becomes, depends on the business. Making goods may also need equipment.
The nine flows
3. Sell the goods to customers
Selling goods to customers gives them value.
The costs of selling, such as staff costs and promotion, are left out here. Promotion costs are spent to increase sales.
The nine flows
4. Sales arise and become receivables
Sales arise in return for the goods, and at the same time become receivables. Until an invoice is sent and the cash arrives, they stay as receivables.
A receivable is a right to money that is expected to come in. In a cash business, sales become cash straight away, so there are no receivables.
The nine flows
5. Goods turn into expenses
The goods that were sold are gone, and are replaced by the cost of making them.
This expense is called the cost of sales. More precisely, when sales are recorded, the part of the assets (such as goods) used to earn them is moved to expenses.
The nine flows
6. Match sales with expenses
To work out profit, sales and expenses are put side by side. The expenses move to the bottom.
On the asset side (the left of the diagram), things that turn into cash more easily are usually listed higher, so cash sits at the top.
The nine flows
7. Sales minus expenses is profit
Once you know sales and expenses, you know profit, because profit is sales minus expenses.
This profit is called net income. In reality there are many expenses besides the cost of making the goods (the cost of sales), but they are left out here.
The nine flows
8. Profit goes into net assets
The profit becomes part of net assets. It is worked out every year, and net assets keep growing.
Profit becomes part of net assets as retained earnings. The statement that works out a year's sales, expenses and profit is called the income statement (PL).
The nine flows
9. Sales and expenses are counted each year
When a year ends and the next begins, sales and expenses are counted again from zero.
Assets include many kinds of things, such as cash, receivables and equipment. Assets grow by the amount of profit, and profit builds up every year.
Sales, expenses and profit are divided by year. When profit arises again the next year, it builds up in net assets. Growing net assets make the next investment possible, and the company grows.

Who uses it

executives and managers who want to read financial statements
business owners who want to share their company's numbers with staff

It became the book "Accounting Map" (Diamond, 2021). It has been used in training for a large manufacturer’s sales company and for executives and managers at a staffing company, and in a four-part online course on Schoo.

Use it as an app

KaikeiAccounting, as a game

Kaikei turns the Accounting Map into a game you can play. Just place the transactions that fall from the top, and the “accounting map”—the balance sheet and income statement combined into one picture—grows on screen. Not memorization: as you play, the flow of money settles into your body.

Play Kaikei ↗

Read the book

This is an introductory accounting book that organizes accounting terms simply with one shared diagram. Two things tend to trip up people who want to learn accounting: how hard the terms are to understand, and how hard the relationships between those terms are to grasp. The “Accounting Map” solves that difficulty. Using a single diagram, it visualizes and explains the meaning of the terms and their relationships. And by following the Accounting Map, you can see how your work connects to your company and to society.

The Map of Accounting

How the Accounting Map Was Born

Just hearing the word “accounting,” many people feel “this seems difficult.” I was one of them. I thought it had nothing to do with me.
At the risk of being misunderstood, I think most people today are doing work that either “raises revenue” or “cuts costs.” How about you? Of course, neither of those is wrong—they couldn't be.
But don't you sometimes feel a sense of discomfort about work that consists entirely of chasing the numbers in front of you, raising revenue and cutting costs? Don't you sometimes want to truly feel what the work in front of you is ultimately for, and what it connects to?
I did. In other words, it was something like a sense of connection to society, of contribution to society, of self-efficacy—the feeling that through my work I am connected to society and having an effect on it. How is my work actually useful to society? I wanted to know.
And yet, something as vague as a “sense of contribution” is invisible. So we measure it through the flow of money. The flow of money is visible: how much money is used for what, and how it circulates, can be expressed in numbers.
Not only through work, but simply by living—even just by buying products—everyone is involved in society's economic activity. The very act of living means being involved in the flow of money across society as a whole.
But the “arrow” that shows how the work in front of you connects to society has become a black box. The connection between your work and society is, above all, hard to see.
To begin with, it is difficult to see the flow of money across all of society at once. So, by looking at the flow of money of the “company”—one of society's main components—you can learn how you contribute to society. The tool for that is “accounting,” because accounting is a common language.
Precisely because the rules for tracking and managing the flow of money are decided worldwide, everyone can work with peace of mind. Just as it is never too early to learn English, if you know accounting you can converse with people of any generation and any position.
Accounting connects “me” and “society.” Because accounting describes the flow of money, knowing how money flows through the world leads to knowing society.

Source: excerpted from the preface of The Accounting Map by Tetsuro Kondoh and Makoto Okiyama (Diamond, 2021). The full text is published on note.

I hope the Accounting Map spreads as a way for people who have never engaged with accounting to begin to know society.