Friday, September 19, 2008

T-Accounts

So from the previous post, I noted that I was pursuing my MBA Part-time this fall.

This Semester I am taking 3 classes, 2 of which are half term and one that is full term. To adequately prepare the B-School student with the rudimentary basics of "Business", it is best to have an Introduction to Financial Accounting Course.

Now mind you the textbook's title is Introduction to Financial Accounting in an Economic Context, which begs to question where was this textbook hiding, given the current Wall Street crisis, in the fat cat's bookshelves?

Our class has begun to explore Financial accounting techniques when drafting up Statement of Cash Flows, Income Statements, Balance Sheets...etc.... What is interesting is that there is a "Direct" and "Indirect" method for drafting a Statement of Cash Flows. Take a guess which method many American accounting firms tend to use compare to the rest of the world?

You guessed it..."indirect"....here's a recommendation to Hank Paulson and "W"....stop talking the talk and actually propose that all American corporate institutions to begin preparing their documents via the "Direct" method...maybe...just maybe....there might be an easier means for oversight and data collection to crack down on incompetence accounting and spending??

For all you non-business peeps...here's the eqn to know...

Assets = Liabilities + Shareholder's Equity....

There has to be a balance to the system when everyone wants a piece of the pie...

My money on Lehman Bros and Merrill Lynch's downfall...someone did not follow the rule and ensure that A = L + SE with all the revenues and expenses coming and going...that and someone probably messed up the numerical calculation when using a T-Account...

-ApuTao

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