Accounting equation & foundation

Janis Weber here, and I am here on a mission to introduce financial accounting to you. I have just some short talks that I'll make that will try to give you a feel for the field of accounting as it relates to financials. I'm hoping to spark more interest in the topic, so that you will develop it further.

But at the moment, I'll just tell you my background. I am a CPA, which means certified public accountant. I have had a career in accounting as a public accountant. I had a practice of my own for many years. Then I started working in accounting education, and I teach at a public university. I have a double career in accounting, and I've had lots of fun in both ways of working with accounting. I hope I can give you some understanding and some interest in the field of accounting as it relates to this financial record-keeping. I'll just go ahead and start. Today, we're going to have a talk about the accounting equation and the foundation of accounting. This topic is actually the part that most people remember when they learn about accounting. Because they remember the struggle of getting their head around this. So I'm trying to make this so simple that it is just intuitive whenever you think of it in your memory in the future. Without further ado, financial accounting.

This is just a system of concepts, procedures, reports that enable outsiders to glimpse into the company's operations. So what you have is external users that are searching for information about a company, and they want to use that to decide whether to do business with the company. Some examples, you have investors who look at the financial statement and try to decide should I buy some stock in this company. Then maybe creditors are looking at the financial statements and saying, should I loan money to this company? Are they going to pay me back? Then you have customers that are trying to decide whether to buy from your company and sometimes, many times, suppliers are trying to make a decision about, if they have a limited supply, whether they want to agree to supply your company with their product. All these people are analyzing the financial statements to see about stability and prospects for the future and a lot of different things that you can gain from reviewing financial statements. Some other entities also use these financial statements to make decisions, like governmental jurisdictions, taxing authorities, regulatory authorities. They review financial statements to see what's going on with the company. Then analysts, analysts take the financial statements and look at all the details and compare your company or this company to another, and that's how they decide what rating to give the company that influences people who are buying stock all over the world. Analysts are very important in their use of the financial statements. Then lastly, the most unusual one that people don't normally think of is that employees can use the financial statements. If an employee is inside the company, they might need to review the company's financial statement to see about the future prospects of this company so they would know whether this is a great company for them to continue working for, or if they're considering being employed by the company is this a company that's going to survive. They can analyze the company by looking at those independent reports that are the financial statements and decide whether or not that company is right for them, a good fit or should they look elsewhere.