Accounting and the AAA

“Anywhere but a bank”, that used to be my response whenever I was asked by my relatives about my career choice. It was not that I particularly had anything against a white-collar corporate job, it was just that I didn’t want to look as sad as most of the cashiers I see behind the counters of commercial banks. So, when we were asked the rudimentary “science or arts’ question in secondary school, I knew deep down that I had to stay far away from anything that could mistakenly set me upon that path. My guidance and counselling teacher had to put a call through to my parents to encourage that I do accounting, considering that I was the best with numbers in the entire school.

Fast forward some 20 odd years later, I am in Lagos Business Schools echoing the answer of a complex T-accounts problem to PROF. AWALABI’s question. I got to realise that minus the fact that the prof that takes this course at LBS is a born genius, accounting is not as much of an energy drainer as I had initially assumed. There is the way the curriculum of that course goes that makes it seem like you are not just learning a new skill, but also that everything you have known about business anchors on this knowledge. I have been able to look at my personal business in a whole different way. I am now more curious to “see the books” and ensure there are not any “fraudulent” accounting entries.

I have had the privilege to remix our course content to properly prepare you for your learning expectations. The following list is dedicated to those readers that think accounting is a drag and only boring people understand let alone enjoy it. For ease of reading, let us call this our group ‘the Association of Accounting Avoiders’ (AAA), and state here that over 60% of Nigerian CEOs are unknowingly members of the AAA. Below is my understanding of what each topic aims to teach:

1. Users and suppliers of financial statement information: This topic in the first module was accurately dedicated to us. The “accounting is for accounting department” bunch. Prof Awalabi started by explaining how he was the national president of our association. He too felt accounting was boring and he did not know jack about it until he joined the MBA at Lagos Business School. I think he said his first degree was in animal husbandry or something totally unrelated. He then explained how his new knowledge of accounting has helped him make better stock-selection decisions. This caught the interest of me and many of my #EMBA27 classmates as most of us were “executives” and needed to understand anything that will aide us to make better decisions. Anyway, thinking back to that day, I will say the facilitator had me at HELLO.
2. The four financial statements, and the accounting equation: Have you ever heard the accounting buzz word ‘balance sheet’ before? Well, it is just one of the 4 financial statements that give you important information about a company and its dealings. You could look at the combination of all 4 statements and immediately answer these questions: a)Is this billion-dollars in revenue company really successful?b)How much of that money is really theirs?c)Are they more profitable than a smaller company with only a couple of hundred million in their books?d)What snapshots in time do they make their most sale? e)When are they less liquid for me to press my position in a deal negotiation with their management? There are many more questions that would amaze you when you finally take his class on Corporate Financial Accounting (CFA).

3. The basics of profitability: Will explain this later..

I will stop here to continue next week as I intend to keep my pieces short enough to allow easy digestion. I will however leave you with one of my usual words of wisdom as that has unintentionally become my M.O. This is actually an extract from a book I love so much, `Essentialism: The Disciplined Pursuit of Less’ by Greg Mckeown.

“The word priority came into the English language in the 1400s. It was singular. It meant the very first or prior thing. It stayed singular for the next five hundred years. Only in the 1900s did we pluralize the term and start talking about priorities. Illogically, we reasoned that by changing the word we could bend reality. Somehow we would now be able to have multiple ‘first’ things.”

Signed: The Prince of Business