Finance used to be Boring

Starting my Journey in the Corporate Financial Accounting(CFA) Class

Who would have thought that I will develop this kind of interest in the study of Finance? Having gotten Admission late into the LBS MEMBA program, thinking there will still be Orientation, I was shocked that Classes already started, the WhatsApp group active and I was feeling like a fish out of water.

 I got to the CFA Class having missed the first brush-up class. I was surprised at how Prof made the course sound so easy.

Finance Terms and Financial Statements

Starting with asking us questions about Salon Business and Cement Business and listing the different items for each of the Businesses. This now led us to the description of the following terms:

1. Entity– is the same thing as the business for example MEMBA 11 World-class Business Education Trainers. The entity is the same as the Business.
2. Resources– is the same as Asset. This includes Funds, Cash, equipment, Inventory, and other materials used for running the business.
3. Sourcing of Funds– funds can be sourced through the following ways
   • Debt/borrowings- can be from Banks, friends, etc.
   • Equity- Owner’s contribution to aid in starting the Business

Financial Statements(1&2) and 5 Key Accounts

The above sounded easy to understand, then we moved forward, and Prof was very patient with us. He understood that a lot of us do not have financial background and kept going step by step.

Then came the following financial statements:

The first Financial Statement

1. Statement of Financial position popularly known as the Balance sheet is a financial document that summarizes a company’s assets, liabilities, and shareholders’ equity as of a particular date. It also shows how much money the owners have put in the business.
   • The formulae- Prof always said if this is not included in your note, then you are yet to understand this financial statement

Assets=Liability + Owners Equity

A=L + OE

• He broke this further down, illustrating how 39 of us can contribute N 100,000 each and invest in a business. This is equivalent to 3.9 million, which is owner’s equity. Easy Right? He then talked about us borrowing 1.1 million from the Bank
  • This takes us to a total of N 5 million assets.
    • Asset= Liability +Owner’s equity
    • A=L+OE
    • N 5 million= N 1.1 million+3.9 million.
  • This was clear, we kept going…
• In summary, there are 3 key Accounts in this Financial statement namely: Assets, Liability, and Owner’s equity.

As we journeyed in the world of corporate financial accounting it was clear that these 3 Accounts will always come into play as went along. This is about the first financial statement that we studied in the CFA Course.

We continued the journey into the 2^nd Financial statement.

• Income Statement or popularly known as Profit or Loss Statement. Before now I used to think it was Profit and loss, but during this Class, Prof stressed that it was Profit OR Loss, not Profit and loss.
  • This is the financial statement that displays revenues, expenses, and profits for a specific time, the income statement.
  • It captures the revenue realized in the business, and then the total expenditures/costs (expenses) are deducted, then you will have the Net income as the outcome.
  • Here the stress was on accomplishment and efforts
    • If the effort is more than the accomplishment, then the business will record a loss
    • If the accomplishment is more than the effort, then the business will record a profit or gain.
  • In summary, there are 2 key Accounts here namely: Revenue and Expenses
• The Summary of the above is there are 5 Key Accounts in financial accounting namely:
  • Assets
  • Liability
  • Owner’s Equity
  • Revenue
  • Expenses

Conclusion on the first two

I left the Class that day feeling different, from being bored with Finance to being excited about the CFA Course. Evaluation of all the Courses we have done so far, I have spent more time on CFA because there was a lot to do, as we went along to the end with the Capstone Project, it was obvious that this is the course that will keep me on my toes and get me stretched. In our next episode, we will be discussing more on the CFA journey with Prof.

References

https://www.google.com/search?q=financial+statement+meaning&ei=oXZNY_6bGI-Vxc8PhOGcsA0&oq=financial+statement+&gs_lcp=Cgdnd3Mtd2l6EAEYAjIECAAQQzIFCAAQgAQyBQgAEIAEMgUIABCABDIFCAAQgAQyBQgAEIAEMgUIABCABDIFCAAQgAQyBQgAEIAEMgUIABCABDoKCAAQRxDWBBCwAzoGCAAQFhAeSgQIQRgASgQIRhgAUPsIWJZEYIBwaAFwAXgBgAGOA4gBgSmSAQgwLjIyLjQuMZgBAKABAcgBCMABAQ&sclient=gws-wiz