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Balance sheets demystified

Accounts Demystified is the name of a book that I have just read,  and posted a review of in my LinkedIn reading list.

As a firm of accountants, at K&H we are always looking out for ways to help our clients understand better what it is that we do for them. We are (quite naturally) convinced that our work is of great value, but sometimes when you don’t fully understand something, it is hard to see the value.

Balance sheets are a good example of this. Most business owners understand their profit and loss account, but few really know why their balance sheet is probably the most important part of their accounts. It is also the hardest thing to get right – it has to balance!

The book also reminded me to be on guard about using jargon. ‘Jargon’ does not only meant obscure words and acronyms; but also words and symbols that we commonly use in the office but are not always understood (in the same way at least) by non-accountants. For example:
– ‘net’ and ‘gross’
–  numbers in (brackets), red type, or with a dash in front are usually negative
–  ‘accruals’
–  ‘cash’ often means not on credit, rather than notes and coins
–  and of course the old chestnut of ‘debit’ and ‘credit’

If you’re interested in my other book reviews, look at my linkedIn page.

I’m planning to run a short informal session to explain balance sheets and cover some of the jargon. Please let me know if you’d be interested in coming along.

One Response to “Balance sheets demystified”

  1. Steve Mills says:

    Another great article by Andrew Grey. Understanding what a businesses balance sheet is essential!

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