EVERY DAY IS A LEARNING DAY “FINANCIAL ACCOUNTING”

Hello everyone, welcome to my blog.

Yesterday we had an extra class for corporate financial accounting with Dr. Akintola Owolabi. We used a site called “When2meeting.com” to agree on the common time for the extra one hour class as agreed with Dr. Owolabi last week Saturday. I am really amazed about the resourcefulness of the EMBA27 executives, even with my years of experience as an IT professional, I have never heard of this tool. “Every day is a learning day- Winston Marshall”.  That was how we arranged and agreed for CFA night class between 9 pm and 10 pm.

In the first chapter, I learnt that you have to subtract your business expenses from your total revenue to get your net income. This gives you a picture of your business’s profitability, that is, how much you are earning after paying to operate your business. I was taught that we have five account types (Assets, liability, owner equity revenue and expenses) and finally the fundamental accounting formula “ASSET = LIABILITY + OWNER EQUITY”.  The formula is straightforward: A company’s total assets are equal to its liabilities plus its shareholders’ equity. We also discussed four plus one elements of financial statement, they are;

1. Statement of financial position (Balance Sheet)
2. Statement of profit or loss (Income Statement)
3. Statement of cash flow (Cash flow)
4. Statement of change in equity
5. Note to the account

And Dr. Owolabi emphasized that, revenues, sales, gross earning and turnover are called “accomplishments” while expenses are called “efforts” 

In chapter 2, I learnt how to analyze transactions using T-accounts, understand how accounting works, journal entries, and the use of trail balance. Furthermore, we deep dive into Assets, Liabilities and Owners’ equity, that Assets are economic resources that provide a future benefit for a business. For example, cash, account receivable, note receivable, inventory, prepaid expenses, land, building, equipment, furniture and fixtures.

Liability is a debt, a ‘payable’ is always a liability, and the most common types of liabilities are; Account Payable, notes payable, accrued liabilities (like expense you have not yet paid such as, interest payable and salary payable).

Shareholders’ Equity is the owners’ claims to the asset of the company or organization, such as: common stock, retained earnings and dividend or in a single person business, there is a single capital account.

We were told that the left side is (Asset) and right side is (Liabilities and owners’ equity) of the accounting equation, that every transaction’s net amount on the left side of the equation must equal the next amount on the right side on the accounting equation.

Third chapter, was about ‘fiscal year’ which usually begins with the first day of a month and ends twelve months later on the last day of a month. For example: from July 1, 2021 to June 30, 2022 while a ‘calendar year’ is (January 1 to December 31) as their accounting period.

The chapter also revealed that under the accrual basis, companies record transactions that change a company’s financial statements in the periods in which the events occur while under cash-basis accounting, companies’ record revenue when they receive cash. They record an expense when they pay out cash.