Accounting is one course I had always dreaded from childhood probably because I always associated it with too many calculations and numbers looking ambiguous and encompassed with formulas and functions. These were the background of what I can summarize as a background phobia I developed for accounting.
Navigating through school, I stylishly avoided all the courses that had to do with numbers and accounting. But coming to LBS, it has become the big Elephant in the room and must be addressed on its own terms.
Some of the topics we discussed were:
Understanding and analyzing financial statements.
Financial statements (or financialreports) are formal records of the financial activities and position of a business, person, or other entity.
Relevant financial information is presented in a structured manner and in a form which is easy to understand.
- A balance sheet or statementoffinancialposition, reports on a company’s assets, liabilities and owners’ equity at a given point in time.
- A statement of profit or loss or statementofrevenue& expense—
This reports on a company’s income, expenses, and profits over a stated period.
A profit and loss statement provides information on the operation of the enterprise. These include sales and the various expenses incurred during the stated period.
4. Statement of cash flow reports on a company’s cash flow activities, particularly its operating, investing and financing activities over a stated period.
A comprehensive income statement involves those other comprehensive income items which are not included while determining net income.
And 5. notes to the account.
Having given a brief introduction to financial statements, it’s ideal for us to go deeper into the concept of understanding and analyzing financial statements.
A transaction is any event that has a financial impact on a business and can be measured reliably. It must have an economic impact by having figures that can be measured.
A transaction has 2 sides to it which are giving and receiving.
The general accounting equation is
Assets = liabilities + owners’ equity.
In transactions, we should have each account for the accounting equation.
Assets can be current or non-current assets
Liabilities can be short term or long term
The owner’s equity can be share capital or stock.
At the end of the day, revenue and expenses are transactions but one as the constructor of a financial statement must know that it will affect the owners’ equity through retained earnings.
This is just a brief overview of some of the things we were taught in Corporate financial Accounting.
The saying that if you cannot beat them, you join them.
This is just my situation right now because I have made so much effort to break that bias in my head about accounting and embrace it maximally. And that has got me to the realization that it was not as bad as I anticipated, and I should be able to put in more work and practice it.