The words of W.B. Yeats, i.e. “Education is not the filling of a pot but the lighting of a fire.” define my experience in the LBS #EMBA27 Corporate Financial Accounting as I feel a real fire of passion of learning and applying accounting has been lit up in me. The hands-on and practical approach to teaching adopted by Professor Akintola Owolabi has helped me develop a genuine interest in accounting that goes beyond passing an exam as he is able to simplify even the most complex accounting concepts.
Most people without an accounting background, including me, think accounting is boring even if they agree it’s an essential function for every organization irrespective of size and sector. Whenever the word accounting is mentioned, what pops in such people’s minds are the scary thoughts of debit/credit, figures, calculations, and t-account. However, the subject can be very interesting or even exciting in some ways.
I have learned that accounting is much more than just number crunching, even covering areas such as communication and investigation in some ways. I now appreciate the fact that accounting is an essential part of evaluating business performance and planning for the future of the business. It generally includes information on sales, profits, and debtors (credit clients that owe cash to the company).
Irrespective of who manages the accounting function, it’s wise to understand accounting basics. Suppose you can read and prepare these basic documents. In that case, you’ll understand your business’s performance and financial health — as a result, and you will have greater control of your company and financial decisions.
Part of the learnings from the course is the different types of accounting statements and their application or relevance.
The balance sheet – a snapshot of a business’s financial standing at a single point in time. A balance sheet will also show you the assets and liabilities of a business or company and the business’s retained earnings, which is the amount of profit you’ve reinvested in your business (rather than being distributed to shareholders). Balance sheets typically specify fixed assets, current assets, long-term liabilities and current liabilities. A balance sheet summarises a business’s financial health and provides a ‘snapshot’ of a company’s financial position.
Profit or loss (P or L) statement
A profit or loss (P or L) statement provides an overview of a business’s income and expenses over a given time period (e.g. quarterly, monthly, or yearly), i.e. it contains the details of the profit or loss made by a business or company within a specified period.
Cash flow statement
A cash flow statement analyzes the business’s operating, financing, and investing activities to show how and where you’re receiving and spending money.’
An income statement shows your company’s profitability and tells you how much money your business has made or lost.
Over the past few weeks, I have also learned some basic accounting terms, including Debits & Credits, Accounts, Receivable & Accounts Payable, Accruals, Assets, Capital Cost of Goods Sold, Equity, Expenses, Fiscal Year, Liabilities, Profit, Revenue amongst others.