Accounting Made Simple: Accounting Explained in 100 Pages or Less
Author: Mike Piper
Publisher: Simple Subjects
Publication Date: 18 December 2012
Number of Pages: 114
As an accounting and finance professional, I am often asked by colleagues from non-finance department that how to understand financial figures and what is about accounting.
I try to explain to them. But some of them want to have a book explaining basic accounting concepts. I help them to look for such a book serving their purpose and finally, I find Piper’s book is the one solving their problem.
Piper is a Certified Public Accountant in Missouri, US. He has been a full time writer since 2008 with a series of books on personal finance. Piper’s writing has been featured in The Wall Street Journal, Money Magazine and Forbes. In addition, he is also managing a popular blog ‘Oblivious Investor’ spreading the ideas of successful investment.
Prior to full time writer, he worked as a financial advisor and tax accountant in US. For more information on the author, just click: https://obliviousinvestor.com/about/
Content in brief
The book starts with introduction to accounting equation. Accounting equation is assets equal to liabilities plus owner’s equities. It is so significant in accounting that every readers should understand this concept before going into the chapters followed.
After introducing accounting equation, it goes to Part 1 of the book which is introducing financial statements and how to read and prepare them. There are four different chapters and each chapter covers 1 statement including the balance sheet, the income statement, the statement of retained earnings and the cash flow statement.
In each of these chapters, most major line items are explained briefly and topics such as the difference between current and long term assets, operating vs net income and three categories of cash flow are discussed.
The last chapter in Part 1 is about financial ratios which interpret the financial statements for comparison with other companies. Piper explains some important ratios such as liquidity ratios, profitability ratios, leverage ratios and asset turnover ratios.
Part 2 covers various topics including accounting principles, bookkeeping and few more complicated areas in accounting.
The first chapter in Part 2 briefly explains the concepts and assumptions behind Generally Accepted Accounting Principles (GAAP). Next, the author describe bookkeeping procedures such as how to prepare journal entries with debits and credits, T-accounts, general ledger and trial balance.
After that, Piper introduces a very important accounting concept, cash method vs accrual method. A lot of beginners mix up cash inflows (outflows) and recorded revenues (expenses) while the chapter explains the differences and why does accounting adopt accrual method.
The book is concluded by three chapters which are considered complicated to beginners. They are depreciation of fixed assets, amortization of intangible assets and inventory and cost of goods sold.
Accounting Made Simple
18 Dec 2012
My opinion on the book
Regarding the book written by Piper, as described by the name, it is only 97 pages (less than 100 pages) long in content.
The book has no technical jargon and is written in plain English. Chapters are well defined and summary section included in the end of each chapters.
It is very easy to read and suitable to those who are looking for explanation of basic accounting concepts and how to read financial reports.
Piper picks the basic but most important concept to explain within 100 pages. You will have good overview of accounting conceptual framework and the accounting system of a small business. If you are running a small business or start up, it is a very good book for you to know how to read your financial statements.
Nonetheless, the book is too simple especially lacking in some important areas such as financial instruments. However, I cannot complain as the title has already limited the length is within 100 pages.
From my review of many other books introducing accounting to beginners, it is the best book summarising accounting basics in simple English. It is very good for all people without any accounting or finance knowledge to begin with on understanding accounting concepts.
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