Mark Robilliard and Peter Frampton are the founders of Accounting Comes Alive International, an education organisation that teaches accounting and business literacy around the world. They are certified accountants who qualified while working at KPMG, the ‘Big 4’ international accounting firm. Peter and Mark work with Accounting Comes Alive’s licensed trainers to serve leading corporations, not for profit organisations and universities promoting accounting literacy. They operate in North America, Europe, Africa, Asia and Australia.
The standpoint of the author is to facilitate the learning of accounting principles. The target readership is anyone who is interested in understanding accounting, from high school students to undergrads to MBAs to business executives.
The 5 universal elements of accounting:
The accountant can determine how many subcategories to record within the 5 main categories.
The accounting equation is equity = assets – liabilities.
Everything physical is an asset. Not all assets are physical, some are intangible. Assets always have an object-claim duality. This financial duality is fundamental to accounting and is the premise upon which accounting is based. Every asset has an associated ownership claim. The two different types of claims are ownership claims and loan claims. Claims are described on a for-profit company’s balance sheet as liabilities and equity. Current assets tend to be considered liquid in the sense that they can constantly be flowing in and out of the business. These are assets that can typically be converted into cash within one year:
- Cash is the most liquid asset
- Tangible assets
Non-current assets tend to be written on the balance sheet headings as:
- Investments (long-term)
- Property, plant and equipment
- Intangible assets
- Other assets
Liabilities have priority to be paid if the company is liquidated, thus, owners cannot withdraw any money from the company until all liabilities are paid.
Owners’ equity is totally separate from assets. Owners’ equity is money that owners have invested into the company minus the money that the owner withdraws from the company. The owner can also be paid dividends from the profit of the company.
The BaSIS framework has shown me in a visual sense the relationship between the balance sheet and income statement. The framework represents a combination, into a singular representation of the Balance sheet and Income statement. A combination of Expenses and Income form the income statement within the BaSIS framework, and the profit is calculated from Income – Expenses and transferred to Equity which affects Equity and Assets. The balance sheet is a combination of Assets, Liabilities and Equity on the BaSIS framework.
This resource has given me a clear understanding of the 3 financial statements, how they relate to each other. I now know how to categorise assets, expenses, liabilities, equity, and profit.
I have applied the BaSiS framework when dealing with my company’s accounts. It has helped me in terms of understanding what goes where. I particularly enjoyed this resource because it uses visual as well as kinaesthetic learning to put the key principles and points across whereas other resources such as Finance and Accounting for Non-Specialists by Atrill, P. and McLaney, E. (2015) are less visual and practical, making it harder to understand.