Introduction to

Accounting and
Building Financials

Contents

• Accounting introduction
• Building financial statements

© 2020 Financial Edge Training 1

 Accounting Introduction –
Financial Statements

Invested cash
Shareholders 2
1 buys operating Balance
invest assets sheet

Cash
5 reinvested
Or returned to for growth
6 shareholders

Profits Assets
Cash flow Income
4 turn to 3 produce
statement statement
cash profits

Accounting Introduction –
Balance Sheet Formula

Balance sheet – a point in

time
Use of funds Source of funds

Liabilities
Describes financial position
Assets

Equity

Assets = Liabilities + Equity

Must always balance!

© 2020 Financial Edge Training 2

 Accounting Introduction –
Balance Sheet Transactions

Owners inject
Assets Liabilities
capital

Transactions
have 2 effects

Equity
What happens?

Accounting Introduction –
Income Statement and Balance Sheet

Balance sheet
Use of funds Source of funds Income statement
explains the
change in retained
Assets Liabilities earnings

Income statement

+ Sales X
- Expenses (X)
Equity
= Profit X

Shows accumulated
profits not paid out to
shareholders

© 2020 Financial Edge Training 3

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© 2020 Financial Edge Training 4