Accounting For Engineers

The title is a cheeky way of saying: we’re not trying to make you an accountant (nor am I an accountant) but let’s demystify some of the basics of accounting finance.

First lesson — the 3 main financial statements are…

  • The Balance Sheet
    • In a nutshell:  the good stuff you own & the bad stuff you have obligations on
  • The Income Statement a.k.a. the P&L
    • In a nutshell:  what’s the overall $ coming in, what do we have to subtract from that, & so what’s left over
  • The Cash Flow Statement
    • In a nutshell:  $ in, $ out

And now some terminology…

  • Sales & Revenue are synonyms and refer to the “top line [of the income statement]”
  • Income, Profit, & Earnings are synonyms & refer to the “bottom line [of the income statement]”

Literally you memorize the above, your life changes in regard to being able to hold a conversation in regard to business.

 

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Accounting For Engineers