Powerful ideas from top nonfiction
Try Blinkist to get the key ideas from 5,500+ bestselling nonfiction titles and podcasts. Listen or read in just 15 minutes.
Start your free trial
Blink 3 of 8 - The 5 AM Club
by Robin Sharma
Listen to the Intro
Accounting Made Simple summary
Mike Piper
Accounting Explained in 100 Pages or Less
14 mins
Table of Contents
Accounting Made Simple
summarized in 6 key ideas
Audio & text in the Blinkist app
Key idea 1 of 6
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.
Want to see all full key ideas from Accounting Made Simple?
Key ideas in Accounting Made Simple
More knowledge in less time
Read or listen
Get the key ideas from nonfiction bestsellers in minutes, not hours.
Find your next read
Get book lists curated by experts and personalized recommendations.
Shortcasts New
We’ve teamed up with podcast creators to bring you key insights from podcasts.
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.
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
Categories with Accounting Made Simple
Books like Accounting Made Simple
People ❤️ Blinkist
Sven O.
It's highly addictive to get core insights on personally relevant topics without repetition or triviality. Added to that the apps ability to suggest kindred interests opens up a foundation of knowledge.
Thi Viet Quynh N.
Great app. Good selection of book summaries you can read or listen to while commuting. Instead of scrolling through your social media news feed, this is a much better way to spend your spare time in my opinion.
Jonathan A.
Life changing. The concept of being able to grasp a book's main point in such a short time truly opens multiple opportunities to grow every area of your life at a faster rate.
Renee D.
Great app. Addicting. Perfect for wait times, morning coffee, evening before bed. Extremely well written, thorough, easy to use.
People also liked
Start growing with Blinkist now
26 Million
Downloads on all platforms
4.7 Stars
Average ratings on iOS and Google Play
91%
Of Blinkist members create a better reading habit*
*Based on survey data from Blinkist customers