Accounting Made Simple Book Summary - Accounting Made Simple Book explained in key points
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Accounting Made Simple summary

Mike Piper

Accounting Explained in 100 Pages or Less

4.5 (134 ratings)
14 mins

Brief summary

'Accounting Made Simple' by Mike Piper provides a basic understanding of accounting topics, such as financial statements, debits and credits, and cash flow. It's a great introduction for beginners or non-financial professionals looking to improve their knowledge in the subject.

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    Accounting Made Simple
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    A basic accounting equation measures a company’s financial position using assets, liabilities and owner’s equity.

    Accounting can seem impenetrable and mysterious. But it’s no dark art. In fact, a balance sheet follows a clear logical order. You just need to know how to decipher it.

    Let’s start with the fundamentals: An accounting equation measures financial position using assets, liabilities and owner’s equity.

    Here’s a refresher on what those terms stand for:

    • Assets: Everything a company owns, such as properties, inventory and cash.
    • Liabilities: All the company’s debts, such as loans.
    • Owner’s Equity (also called Shareholder’s Equity): The difference between the two, meaning the company’s ownership of assets, after paying off liabilities.

    The accounting equation states that, no matter what, the following will be valid: Assets = Liabilities + Owner’s Equity. You can also write the equation like this: Assets - Liabilities = Owner’s Equity.

    This equation is applicable for any kind of company, big or small. Imagine you run a lemonade stand. Your assets are: lemonade, the stand, cups and uniforms – worth $100 in total. You took out $60 worth of loans from your sister and your mom – those are your liabilities. So here’s how we would figure out the Owner’s Equity: Assets ($100) - Liabilities ($60) = Owner’s Equity ($40).

    You could use the same equation to measure your financial position when buying a home. If you want to purchase a property for $300,000, you probably wouldn’t pay it all up front. You might take a mortgage for $230,000. That means your home equity would be calculated as: $300,000 assets - $230,000 liabilities = $70,000 equity.

    And a few years later, once you’ve paid off $30,000 of the mortgage, your home equity would be: $300,000 assets - $200,000 liabilities = $100,000 equity.

    One thing to remember about assets and liabilities is that your asset might be someone else’s liability, and vice versa. For instance, in the scenario above, the mortgage is your liability. But it’s the bank’s asset.

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    What is Accounting Made Simple about?

    Accounting Made Simple (2013) provides a brief introduction to the fundamentals of accounting, illustrating how to read the most important financial statements and draw a conclusion about the numbers. It also outlines the double-entry ledger system, a hallmark of accounting best practices.

    Accounting Made Simple Review

    Accounting Made Simple (2014) is a comprehensive guide that breaks down complex accounting concepts in a clear and concise manner. Here's why this book is worth reading:

    • It presents practical examples and step-by-step instructions that make understanding accounting principles easily accessible to anyone.
    • The book covers a wide range of topics, including financial statements, budgeting, and taxes, providing readers with a well-rounded understanding of the subject.
    • With its engaging and straightforward approach, the book ensures that accounting becomes less intimidating and more intriguing, making it definitely not boring.

    Who should read Accounting Made Simple?

    • Small business owners curious about the fundamentals of accounting
    • People who want to be able to read and understand a financial statement
    • Anyone who wants to know about the basic aspects of accounting

    About the Author

    Mike Piper is the author of eight finance books, as well as the popular blog, Oblivious Investor. A certified public accountant, Piper has published articles in The Wall Street Journal, Money and Forbes.

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    Accounting Made Simple FAQs 

    What is the main message of Accounting Made Simple?

    Accounting Made Simple breaks down complex accounting concepts into clear, understandable explanations.

    How long does it take to read Accounting Made Simple?

    The reading time for Accounting Made Simple varies but can be completed within a few hours. The Blinkist summary can be read in just 15 minutes.

    Is Accounting Made Simple a good book? Is it worth reading?

    Accounting Made Simple is a must-read for anyone looking to grasp accounting basics. It offers a concise and accessible introduction to the subject.

    Who is the author of Accounting Made Simple?

    Mike Piper is the author of Accounting Made Simple.

    What to read after Accounting Made Simple?

    If you're wondering what to read next after Accounting Made Simple, here are some recommendations we suggest:
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    • How to Read a Financial Report by John A. Tracy and Tage C. Tracy
    • The Economist: Numbers Guide by Richard Stutely & The Economist
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