David S Murphy Cpa

Understanding Financial Statements David S Murphy Cpa

Financial accounting is history. It is a thing of the past but rather it is a specialized and very technical branch of history. Historians may write about events that took place thousands of years ago, or last month. Financial accountants record and report histories of what happened in the recent past, usually the past year. However, the time frame doesn't matter, financial accountants write about history. As historians, financial accountants face the same philosophical questions that historians in general face every day. Given massive amounts of information about an historical event, what is relevant and will be both interesting and useful to readers of the history? Once the volume of information about an event has been whittled down to a manageable size, how should the information be presented so that it is understandable and relevant? Financial accountants face the same questions every day. It has often been said that those who don't understand the past are destined to repeat it. We all acknowledge that understanding history is important and that a well-written history can be both engaging and fascinating. History serves important purposes besides entertainment. It explains what happened in the past and why it happened. In addition, once we understand the historical milieu surrounding an event, we can forecast what is likely to occur in the future if we see the same pattern of events and forces coming to play in the present. Financial accounting reports serve that same purposes, they explain what happened in the past, and they can be used to forecast the future. In addition, financial accountants have the same general objectives, to write a history that is both understandable and relevant. Most historians use words to spin their stories about the past. Financial accountants use numbers. Once you learn how to listen to them, numbers tell stories just as well as do words. You don't need a degree in history to read, understand, and learn from a well-written history. By the same token you don't need a degree in accounting to read and understand financial statements (balance sheet, income statement, statement of changes in stockholders' equity, and cash flow statement). You just need to learn the language that the numbers speak. The purpose of this book is to provide you with the background and skills that you need as a non-financial manager so that financial statements will talk to you. You will discover that the language that financial statements speak is easy to understand and that the stories that financial statements tell are both fascinating and useful.