Introduction to Accounting : Mastering Financial Statements

Have a high level introduction and understand significance of each of the financial statements namely Income Statement or Profit and Loss, Balance Sheet and Cash Flow

Get a feel for the main accounting principles on which a company’s accounts and financial statements are prepared. These include accruals, prudence, going concern among others

Be introduced to main items that make up Current Assets on the Balance Sheet such as Cash and Cash Equivalents, Debtors or Receivables, Prepaid Expenses, Closing Stock etc. Pick up skills that will be crucial at a later stage when you will be required to assess a company’s health by doing an analysis of it’s liquidity, gearing and solvency 

Be introduced to main items that make up Non Current Assets on the Balance Sheet such as Property Plant and Equipment or PP&E, Intangible Assets such as Goodwill, other Long Term Investments. 

Learn about the main terms that make up Current and Non Current (or long term) Liabilities on the Balance Sheet such as trade payable or creditors, accrued expenses, short term debt, long term debt etc.  Pick up skills that will be crucial at a later stage when you will be required to assess a company’s health by doing an analysis of it’s liquidity, gearing and solvency 

Get familiar with the Equity and Capital side of the Balance Sheet by having a feel for shareholders’ equity, retained earnings, P&L reserve, share premium etc

Go through an indicative balance sheet and get a feel for how the various components i.e assets, liabilities and capital come together

Understand what is revenue aka topline or turnover. Learn about cost of goods sold or COGS and get familiar with the 2 most commonly used approaches for valuing stocks ie last in first out or LIFO and first in first out or FIFO. You will go through a simple, powerful exercise in Excel that will solidify your understanding of COGS, LIFO and FIFO

Become familiar with Gross Profit and understand its importance in particular for manufacturing entities. Be introduced to selling, general and admin expenses 

Learn about EBITDA which captures earnings before interest, tax, depreciation and amortisation. It is perhaps the most widely used metric to gauge a company’s profitability across the world of finance and business. At the same time, it is important to be careful with how one uses EBITDA

Learn about the very fundamental concept of depreciation that comes up very frequently in Accountancy and financial statement preparation and analysis. Go through a simple yet powerful exercise in Excel where you will get to grips with the different methods of depreciation namely  straight line, written down or reducing balance, and units of production .

Learn about EBIT which is earnings before interest and tax. Be introduced to net income or earnings which (along with EBITDA) is perhaps the most widely used metric to gauge company performance and profitability. Earnings per share or EPS is derived from net income

Go through an indicative income or profit and loss statement. Get a feel for how revenue along with the various items of expenses and profit metrics come together and eventually flow through to net income (or earnings).  

Be introduced to the trial balance and understand it’s importance in the preparation of financial statements

Debits and credits for the basis of accountancy and financial statements preparation. It is crucial to have a good grip over them

This is a comprehensive exercise where you will be applying the principles of debits and credits. You will prepare a profit and loss or income statement along with a balance sheet from a given trial balance. We will hand hold you and walk you through each step. You will be on a steep learning curve here!

Get familiar with the main items that go into preparing a cash flow such as operating cash flows or cash flow from operations, investing and financing cash flows. 

Understand the significance of healthy cash flows for a business. Growing revenues with aggressive accounting is not a very sustainable strategy for the long term. 

Be introduced to the direct method of preparing cash flow statements. It is based on cash inflows and outflows, can be difficult to manage and is not as popular as the indirect method

Learn about the indirect method which is widely used for preparing cash flow statements. 

Go through an indicative cash flow statement and get a feel for how the various items come together

This is a comprehensive exercise where you will prepare a cash flow statement using the indirect method. We will hand hold you and walk you through each step. You will be on a steep learning curve here!