Work in the FINs domain, and have been using this for years to teach basics to newbies. Great stuff.
Learn accounting for free
61–70 of 121 posts
Re: Learn accounting for free
#62Pardon my ignorance if any, but I find financials and accounting as quite boring things. Most problems in these are about tracing numbers, reconciliation and mismatches. What thril one can face in these areas? Any examples of challenges you see ?
I see accounting as the money version of a historical account of a company. In that vein, it's the complete data flow of money movements within said company - data from which you could determine strategic priorities, fraud, and power structure, among other things with the right analysis.
I wonder if there's a good flick that shows how powerful a forensic accountant can be.
Re: Learn accounting for free
#63Background: I'm a qualified accountant, and have taught courses on accounting and finance. My thoughts on OP: I read through the first two parts of the first course on this site: - Part 1 Introduction to Accounting Basics, A Story for Relating to Accounting Basics - Part 2 Income Statement Based on what I read, I could not recommend this. You could get to the end of the 'income statement' part, without encountering a…
> Based on what I read, I could not recommend this. You could get to the end of the 'income statement' part, without encountering any definition of 'profit', which is the very thing that the income statement is meant to show. The thing is, that while cash is a matter of fact, profit is a question of opinion. This is a fundamental truism in accounting. You cannot really teach how accounting allows you to express your…
If that's the case, it seems even more strange to have the first two parts of the first section repeatedly refer to 'profitability'.
But I don't agree that you have to start with facts. I think you can start with the account equation, then go on to types of asset/liability/equity, and only then move on to concrete examples of transactions, and how they impact the balance sheet. And then you compare two snapshots of your balance sheet to show what profit is.
You can do all this with concrete examples with virtually no risk (e.g. a lemonade stand where people pay cash before they are served, with almost no equipment to depreciate, no long-lived inventory etc.).
Re: Learn accounting for free
#64Earlier quoted context omitted.
Any advice for intermediate or advanced accounting? I studied finance in school, so I'm confident it the broad-strokes basics, but getting into deeper stuff is still intimidating.
I'm not sure of your starting point or your goals, but maybe: 1. Wood's Business Accounting 2 2. Some of the CFA study materials 3. Some of the 10kdiver threads: https://10kdiver.com/twitter-threads/ 4. Books about financial fraud (that talk about incorrect ways to do accounting). 5. IFRS standards for your industry. 6. Googling 'Accounting for X', where X is something to do with your industry (e.g. 'virtual goods' o…
Thanks!
Re: Learn accounting for free
#65I'm not a fan of debits / credits for folks not going into accounting properly. Porter has a book - the alternatives to debits and credits, using financial information. Basically accounting is an equation you keep in balance. Assets = Liabilities + Equity You can understand how any transaction "posts" by keeping this equation in balance (or solving it). You borrowed $100K? Your liabilities are + 100K, and cash (an as…
I find what you have said harder to follow than just knowing debits are positive and credits are negative. The A=L+OE formula is a poor model for understanding accounting when the accounts dont fall neatly into those 5 high level categories. And unfortunately you almost immediately encounter accounts of that nature (accumulated depreciation and loans are great examples).
What happens if I debit a loan account? Debits are not positive, a debit to a loan account is a negative that reduces it. If I issue a refund that might be a debit to an income account (that is a negative to the account total).
Re: Learn accounting for free
#66I'm not a fan of debits / credits for folks not going into accounting properly. Porter has a book - the alternatives to debits and credits, using financial information. Basically accounting is an equation you keep in balance. Assets = Liabilities + Equity You can understand how any transaction "posts" by keeping this equation in balance (or solving it). You borrowed $100K? Your liabilities are + 100K, and cash (an as…
I find what you have said harder to follow than just knowing debits are positive and credits are negative. The A=L+OE formula is a poor model for understanding accounting when the accounts dont fall neatly into those 5 high level categories. And unfortunately you almost immediately encounter accounts of that nature (accumulated depreciation and loans are great examples).
All accounts "fall neatly" into the broad categories, though. There are sub-categories for accounts with contrary normal balances for a given type of a given account category but they still summarize into their parent category.
A contra-equity account (like "Owner draws") has a normal debit balance. That's contrary to the normal credit balance of an equity account. It still summarizes to equity and results in the owner's draws being debited from the owner's equity debit balance.
When I hear programmers talking about debits / credits like they're positive or negative I get a feeling that they're trying to re-invent a really simple "wheel" that they don't want to understand. It reminds me of wild gyrations programmers go thru w/ ORM's to avoid just learning some SQL.
Re: Learn accounting for free
#67Background: I'm a qualified accountant, and have taught courses on accounting and finance. My thoughts on OP: I read through the first two parts of the first course on this site: - Part 1 Introduction to Accounting Basics, A Story for Relating to Accounting Basics - Part 2 Income Statement Based on what I read, I could not recommend this. You could get to the end of the 'income statement' part, without encountering a…
This brings back memories. We Frank Wood's BA1 to learn accounting at O-Level back in the late 80s in Malta! I wonder what edition that one was...
Re: Learn accounting for free
#68Earlier quoted context omitted.
I do not believe that either GAAP or IFRS has a standard definition for "profit". Even GAAP under 703(a) refers to it as net income (and several other related numbers like gross profit).
Would reading IFRS suffice? Is there a suggested book?
The IFRS standards presume the reader is familiar with accounting principles and practice. They provide guidance specific to (i) certain more complex/unusual situations, e.g. business combinations, and (ii) specific verticals, e.g. consumer lending and insurance.
Re: Learn accounting for free
#69I'm not a fan of debits / credits for folks not going into accounting properly. Porter has a book - the alternatives to debits and credits, using financial information. Basically accounting is an equation you keep in balance. Assets = Liabilities + Equity You can understand how any transaction "posts" by keeping this equation in balance (or solving it). You borrowed $100K? Your liabilities are + 100K, and cash (an as…
I find what you have said harder to follow than just knowing debits are positive and credits are negative. The A=L+OE formula is a poor model for understanding accounting when the accounts dont fall neatly into those 5 high level categories. And unfortunately you almost immediately encounter accounts of that nature (accumulated depreciation and loans are great examples).
>debits are positive and credits are negative
That's a drastic oversimplification. Typically, both debits and credits are entered into an accounting program as positive numbers, and it is the nature of the account being debited or credited that determines whether the number is added to or subtracted from the account balance.
Or, as the old joke goes, an accountant for years would always start the work day by opening a locked desk drawer, removing a piece of paper, and studying it for a moment before returning it to the drawer. After his sudden and unexpected death one day, one of his staff had to satisfy their curiosity and opened the drawer to see what was written on the paper. It said, "debits to the window, credits to the door".
To get it, you need to know that by tradition, debits are entered on the left-hand side of the entry form, and credits on the right hand side.
Re: Learn accounting for free
#70Background: I'm a qualified accountant, and have taught courses on accounting and finance. My thoughts on OP: I read through the first two parts of the first course on this site: - Part 1 Introduction to Accounting Basics, A Story for Relating to Accounting Basics - Part 2 Income Statement Based on what I read, I could not recommend this. You could get to the end of the 'income statement' part, without encountering a…
If you're a mathy person, you might find this brief explanation is enough to get going. Where I say 'you', I mean 'your company', not you personally. * Assets: things you own (e.g. tractor, money in bank, money owed by customers) * Liabilities: things you owe (e.g. unpaid supplier bills, loan owed to bank) * Assets and liabilities are both measured in a single currency (e.g. $). * Equity (aka 'book value'): A measure…
This blog entry taught me a mathy way of understanding double-entry accounting: https://martin.kleppmann.com/2011/03/07/accounting-for-compu...
Summarized: a ledger is a directed graph of accounts, where edges are transactions, and each transaction is recorded twice: in the "from" node and the "to" node.