Mar 132008

Wow, what a long week. Two tests, a small presentation for Ethics class, and a major one for Practices. They’re group presentations, because part of what we’re supposed to be learning is how to work in a group.

Until this semester, I’ve maintained the delusion that all my classmates were hard-working, dedicated students who are really interested in learning this material and want to do the best they can in their classes. I’ve largely succeeded because those are the students I tend to spend time with between classes. Now, with the instructors choosing our groups for us, I’ve finally gotten to experience the other kind of student.

In case I haven’t mentioned it before, this is the end of the second year of this curriculum. Most of us will be done after this semester (I still have a few straggler courses to pick up). The Practices class, for example, has a prerequisite of Intermediate Accounting I. Intermediate has a prereq of Principles of Accounting.

Basically, if you’re in this class at all, you’ve had at least two semesters of accounting prior to this. More likely you’ve had three, as this is the last semester of the scheduled curriculum.

So could someone please explain to me how a person could be taking Practices and yet not know where owner’s equity should go on a balance sheet?

This isn’t hard stuff. This is stuff we (should have) learned ‘way back in Principles—the class which is required for all the others. Yet one of my group members, when we were going over the financial statements our group is supposed to be correcting, waved her hand dismissively and laughed “I don’t know where any of that stuff goes.”

Here’s a brief lesson for those of you who have no accounting background. The basic accounting equation, the first thing the Principles instructors write up on the board in GREAT BIG LETTERS, the Alpha and the Omega of accounting, is this:

Assets = Liabilities + Owners’ Equity

The balance sheet is essentially a detailed report of this equation. It has three major sections. Can anyone guess what those sections are?

Now class, for extra credit, under which section would you list the owner’s equity?


 Posted by at 4:45 pm

  2 Responses to “One More Day til Spring Break!”

  1. Um, what? I always thought it was:

    assets = equity – liability.

    Unless this is some kind of Enron-esque accounting in which liabilities are actually assets…

  2. You’d think so, wouldn’t you? But the math don’t work out. The owners still have a claim on that equity.

    It makes more sense, intuitively, if you take a corollary equation:

    Assets – Liabilities = Owners’ Equity

    Whatever’s left of the assets after the liabilities are taken care of belongs to the owners.

    Don’t blame me, I didn’t invent this shit. I just have to learn it.

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