From an early age, I have always had a keen interest in the world of accounting. From studying Accounting at A-level, I have gained further knowledge into this particular subject of my choice. My interest in Accounting and Finance stems from wanting to know how governments and businesses make their vital decisions to be profitable and moreover I have always been interested in the business world and accounting is considered a basic tool of business. I have worked for both small and large business firms, and it has helped me develop a strong linking with the industry as a whole and has also solidified my interest in accounting.
It therefore came as no surprise to me when I learnt that Corporate Financial Accounting (CFA) was one of the courses to be taken in my EMBA program at Lagos Business School because having a sound knowledge of accounting is one of the skills Executives must deploy for the sustainability of their business and career. This course I just realized will equip Executives to help organisations maximize their value. CFA is related to optimizing the value of a shareholder via short and long term financial plan; it involves financing, operating and investing activities
CFA provides tools that helps you decide if to invest, how much to invest to earn good returns on your investment, when to invest, projects to ignore, projects that should be taken together, etc A few such decisions cover if the company should go ahead with the intended investment and if the company should invest in the form of debt, equity or both. One accounting equation mentioned by our renowned Professor Akinwande was Asset = Liabilities + Owners Equity.
ASSETS = LIABILITIES + OWNERS EQUITY
This equation here is one of the basics of accounting which can never be overemphasized. An asset is a resource with economic value that an individual, organization owns or controls with the expectation that it will provide a future benefit. And this could be classified into noncurrent asset and current asset. The liabilities and owner’s equity are being used to finance a company’s asset. Liabilities on the other hand are obligations of a company that needs to be fulfilled in the future. The owner’s equity is the amount that belongs to the business owners and it is shown on the capital side of the balance sheet. At every point in time, the Assets must equal the addition of the liabilities and the owner’s equity and together, they make up a company’s balance sheet.
The concept behind it is that everything the business has come from somewhere – either a third party, such as a lender,, or a owner, such as a stockholder. And this implies that each thing a business has is classified as both an asset and a liability or an asset and an equity. Accounting plays a major role not only in our daily lives but also cuts across all industries.
##To be continued
##Annabel Nzegbule
##EMBA 28
