Why are accounting and financial analysis so confusing?

Why are accounting and financial analysis so confusing?

Financial Statement Analysis and Accountancy 101: In this video we explain why you might not be such a dummy about understanding the basics and the more complicated items . Are you frustrated by accounting and financial statements? If you are given a balance sheet, do you just want to run and hide? Are you intimidated by P&Ls, accruals, amortization, double-entry bookkeeping? Good news. I'm not going to get too deep into any of that. But rather, I want to share with you my own frustrations with accounting and financial statements so that you can completely dispel the notion that understanding accounting and conducting your own financial analysis is somehow above your abilities. 1. There are no black and white answers. Accounting is supposed to reflect reality. Yet reality is an awfully complicated sort of thing, isn’t it? And also, sometimes people want to show you a particular kind of story. For instance, can you ethically manipulate your books to show a high value so that you can obtain optimum financing? The answer is yes. It’s done all the time. And conversely, could you show lower profits, hence a lower value, to reduce your taxes? Yes, and this too, is done all the time. In fact, both things are done so routinely, no one even mentions it. Yet there exists this idea that “numbers are the numbers” and “numbers don’t lie.” What complete nonsense. Numbers can be the most effective lies! The dirty secret about accounting is that everything is cooked. But as long as you understand the underlying assumptions and the purpose of the books, and how they were “cooked” the books can still be both honest and helpful. 2. If you are more confused after speaking with either your attorney or accountant or CFO something is wrong. If you are able to start or run your own company, a good attorney, accountant, or CFO should be able to explain any concept to you in simple language. 3. Trust your gut. No one should ever be more interested in your business than you. You probably know the right answer, you are just unable to express it in accounting terms. But just because you can’t express it, doesn’t mean that you’re not right. 4. If you can measure something you can improve it. This is a critical function of accounting. This is why it is so important to understand the underlying assumptions that are “cooked” into the books — then you can make meaningful comparisons to see how you are improving and what still needs improving. Bottom line: Your books should work for you, not the other way around. But sometimes a business owner needs help getting their books to work for them. For us, we’ve seen very little difference between a great accountant and a great lawyer and a great CFO. As a tax and business attorney, I actually speak the same language as our accountants and ou clients' CFOs. All of us work in concert to characterize and qualify things in order to better represent a narrative that suits our clients needs the best. So what do you find confusing about accounting? We’d love to see if there is actually a question we can’t answer in 100 words or less. So please, if you have a question, leave them in the comments below. We love a challenge. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://ift.tt/1RfwK1f https://youtu.be/IGm9GoFEEhk IRS Medic