The Principles of Accounting
“You have to understand accounting and you have to understand the nuances of accounting. It's the language of business and it's an imperfect language, but unless you are willing to put in the effort to learn accounting - how to read and interpret financial statements - you really shouldn't select stocks yourself." - Warren Buffett”
The stock value of an entity is measured in assets, liabilities, and equity. The flow of money is measured in revenues, expenses, gains, and losses.
Transactions between stock accounts and flow events is referred to as debits and credits. This is how value and money are exchanged and accounted for.
Continuing the explanation of how debits and credits are applied to accounting transactions, this video is demonstrates the process of recording transactions in the accounting journal. Factsheet 1-4 & 1-5 also apply to this video.
This video explains the concept of accrual-based accounting and how it differs from cash-based accounting. Depreciation expense, and how it accumulates as a contra-asset is discussed. Accrued interest and accumulated-other-comprehensive-income are introduced.
1-7: Reconciliation & Financial Statements
This video explains how accounting data is reconciled at the end of a reporting period. This process takes journal entries, consolidates each account into T-accounts, builds a trial balance, and reports all summarized information in standardized financial statements.
This video explains how to read and understand financial statements. Darden Restaurants is the focus of this video, their financial statements are located in Appendix A. For reference, Darden's financial statements can also be located here.
Videos are linked in module title.