Financial Accounting

The course arc

Reporting. Then decision.

The first half teaches you to read the three statements; the second half teaches you to use the numbers to decide. — the course, in one line

Block I · Reading the Numbers

• m.01
  The Balance Sheet Equation

  Assets = Liabilities + Equity. Every transaction touches two accounts.
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• m.02
  Accruals vs. Cash

  Revenue when earned, expense when consumed. Not when the cheque clears.
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• m.03
  Capitalise or Expense

  Future benefit? Capitalise. Maintenance only? Expense.
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• m.04
  What You Paid For, Beyond the Tangible

  Generated internally? Expense. Acquired? Capitalise. Goodwill? Test for impairment.
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• m.05
  Obligations, Certain and Not

  Probable + measurable = recognise. Possible = disclose. Remote = ignore.
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Block II · Using the Numbers

• m.07
  Relevant Costs, Contribution & Break-Even

  Sunk costs don't matter. Fixed overhead doesn't matter. Only what changes matters.
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• m.08
  Sales Cascades. Cash Reveals.

  Start with the sales forecast. Let it flow through production to cash.
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• m.09
  Divisions, Metrics and the Price Between Them

  Transfer price = internal pricing = incentive design.
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• m.10
  DuPont, ROIC & the EVA Question

  ROE tells you how much. DuPont tells you why. EVA tells you whether it was worth it.
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