Three Reports
Three Reports
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Bookkeeping for Tax/Financial Accounting is a finite process that results in the same TWO Reports or everyone. An "Income Statement" and a "Balance Sheet".
Bookkeeping for Tax/Financial Accounting is a finite process that results in the same TWO Reports or everyone. An "Income Statement" and a "Balance Sheet".
Unfortunately, the names and formal definitions for these two reports were very confusing to those who learned them in formal Accounting Education.
Unfortunately, the names and formal definitions for these two reports were very confusing to those who learned them in formal Accounting Education.
To Simplify things long term, we are going to teach you a new way to think about these two reports, which are in fact three reports when you come to learn them well, because the Balance Sheet is two reports in one.
To Simplify things long term, we are going to teach you a new way to think about these two reports, which are in fact three reports when you come to learn them well, because the Balance Sheet is two reports in one.
Thus, the THREE basic reports for Large Companies, Small Companies, Heads of Households and Individuals.
Thus, the THREE basic reports for Large Companies, Small Companies, Heads of Households and Individuals.
"Net Income Statement" -- This has a start and end date and it is created from your own work recording and categorizing transactions. This was previously referred to as the the same as the "Income Statement", "Profit/Loss" Statement or "P and L" in traditional accounting education.
"Net Income Statement" -- This has a start and end date and it is created from your own work recording and categorizing transactions. This was previously referred to as the the same as the "Income Statement", "Profit/Loss" Statement or "P and L" in traditional accounting education.
"Net Worth Statement" -- This is for a single date and time. It's generally prepared from third party statements and documents like checking and credit card statements.
"Net Worth Statement" -- This is for a single date and time. It's generally prepared from third party statements and documents like checking and credit card statements.
"Comparative Net Worth Statement" - The Balance sheet is in fact a 'comparatie networth statement' Net Worth is calculated two different ways and the two results are compared to each other to try to ensure no egregious transaction mis-categorization or omissions transpired.
"Comparative Net Worth Statement" - The Balance sheet is in fact a 'comparatie networth statement' Net Worth is calculated two different ways and the two results are compared to each other to try to ensure no egregious transaction mis-categorization or omissions transpired.
Saying this again another way for greater clarity...
1) A "Net Income Statement" is the same as the "Income Statement", "Profit/Loss" Statement or "P and L" in traditional accounting education.
1) A "Net Income Statement" is the same as the "Income Statement", "Profit/Loss" Statement or "P and L" in traditional accounting education.
2) A "Net Worth Statement" is not clearly defined in traditional accounting curriculum as it should be. A Net Worth Statement is, in fact, the top half or bottom half of a Balance Sheet. Oddly enough, the universally promoted "description" of the entire Balance Sheet is in fact an accurate description of the top or bottom half of a Balance Sheet only, but not remotely accurate for the entire report.
2) A "Net Worth Statement" is not clearly defined in traditional accounting curriculum as it should be. A Net Worth Statement is, in fact, the top half or bottom half of a Balance Sheet. Oddly enough, the universally promoted "description" of the entire Balance Sheet is in fact an accurate description of the top or bottom half of a Balance Sheet only, but not remotely accurate for the entire report.
3) A "Comparative Net Worth Statement" is the exact same thing as a "Balance Sheet" in traditional accounting. It has a start date and an end date and it is NOT a snapshot in time as the "universally accepted description" would state.
3) A "Comparative Net Worth Statement" is the exact same thing as a "Balance Sheet" in traditional accounting. It has a start date and an end date and it is NOT a snapshot in time as the "universally accepted description" would state.
This extremely inappropriate word-play with the Balance sheet Definition created cognitive dissociation between the critical mind and subconscious mind. It is probably the largest, most obvious cognitive manipulation in the entirety of US Educational Curriculum.
It is so bad it could have only have been created with intention to encourage the critical and conscious mind to "check out" during accounting education, leaving most who attempt the education permanently confused and dis-empowered without proper or obvious reason.
This extremely inappropriate word-play with the Balance sheet Definition created cognitive dissociation between the critical mind and subconscious mind. It is probably the largest, most obvious cognitive manipulation in the entirety of US Educational Curriculum.
It is so bad it could have only have been created with intention to encourage the critical and conscious mind to "check out" during accounting education, leaving most who attempt the education permanently confused and dis-empowered without proper or obvious reason.
Welcome to the Accounting Education Conspiracy.
The Evil in the curriculum is so blatant, most will wonder why they were unable to see it from Day 1.
Welcome to the Accounting Education Conspiracy.
The Evil in the curriculum is so blatant, most will wonder why they were unable to see it from Day 1.
Report 1 - The Net Income Statement
Report 1 - The Net Income Statement
'How much money did you make for a given period of time?"
'How much money did you make for a given period of time?"
This report was more commonly referred to as the "Income Statement" , the "Profit/Loss Statement" and/or the "P and L" in traditional accounting education. All of these names refer to the EXACT SAME REPORT.
We've renamed to the "Net Income Statement" to directly remind all knew Bookkeepers what it does with less confusion, inference and verbal omissions.
Why did we add "Net" to the name?
The general equation that describes this report is "Net Income = Income - Expenses".
Without adding the word "Net" the equation reads "Income = Income - Expenses" , and that doesn't make any sense given the fact we are creating the report for the sole purpose to deduct known expenses from an income value to start with. If the expenses were zero we'd have no need to prepare the report to start with.
How's that for another subtle, cognitive pretzel.
With their lingo it would have been better to say "Income = Gross Income - Expenses " but they never did that. And if they were going to do that it would have been even better to say "Net Income = Gross Income - Expenses =". But if they did that, they'd have had to name the report the same thing we just did and that would have provided a level of clarity they have sought to avoid for decades if not centuries. .
By adding "Net" to the Report Name each time the report name is uttered the intentions of the report can not be lost.
Welcome to the Accounting Education Conspiracy.
The Evil in the curriculum is so blatant, most will wonder why they were unable to see it from Day 1.
Welcome to the Accounting Education Conspiracy.
The Evil in the curriculum is so blatant, most will wonder why they were unable to see it from Day 1.
Report 2 - The Net Worth Statement
Report 2 - The Net Worth Statement
"What was your (company's) Net Worth on a given date and time?"
"What was your (company's) Net Worth on a given date and time?"
This is actually a very simple report governed by the equation:
Net Worth = Assets - Liabilities
"Assets" are cash, balances in checking, savings and investment accounts, and objects with a quantifiable resale or salvage value.
Assets are summarily thought of as "things you own".
"Liabilities" are credit card balances, loans and other debt.
Liabilities are summarily thought of as negative cash balances and/or "amounts you owe".
The Confusion revisited...
In the introduction we exposed the fact that this simple report is not defined properly in main stream accounting curriculum.
The definition of this report is in fact applied to the Balance Sheet in entirety,, which contains two Net Worth Statements not one, and together they perform a function that neither by itself could do. .
Welcome to the Accounting Education Conspiracy.
The Evil in the curriculum is so blatant, most will wonder why they were unable to see it from Day 1.
Welcome to the Accounting Education Conspiracy.
The Evil in the curriculum is so blatant, most will wonder why they were unable to see it from Day 1.
Report 3 - The Comparative Net Worth Statement
Report 3 - The Comparative Net Worth Statement
"Do your books accurately account for changes from your (company's) net worth from the beginning of a reporting period to the end of a reporting period without obvious errors or omissions?"
"Do your books accurately account for changes from your (company's) net worth from the beginning of a reporting period to the end of a reporting period without obvious errors or omissions?"
Wow. That's not not at all how a Balance Sheet or any accounting report was ever described in any summary or detailed education with such clarity...
Wow. That's not not at all how a Balance Sheet or any accounting report was ever described in any summary or detailed education with such clarity...
The Comparative Net Worth Statement is the Balance Sheet from traditional accounting curriculum.
The Comparative Net Worth Statement is the Balance Sheet from traditional accounting curriculum.
To the shock of most, including many accounting teachers and professionals, it must have both a start date and end date to be prepared properly.
Yet, no one was ever told to think of the Balance Sheet as having a start and end date? Why is that?
In fact, the exact opposite was taught to over 300 Million Americans and all others who may have been exposed to that same main stream accounting curriculum.
To the shock of most, including many accounting teachers and professionals, it must have both a start date and end date to be prepared properly.
Yet, no one was ever told to think of the Balance Sheet as having a start and end date? Why is that?
In fact, the exact opposite was taught to over 300 Million Americans and all others who may have been exposed to that same main stream accounting curriculum.
If they had told you the truth you would have understood how to use it.
If they had told you the truth you would have understood how to use it.
Welcome to the Accounting Education Conspiracy.
The Evil in the curriculum is so blatant, most will wonder why they were unable to see it from Day 1.
Welcome to the Accounting Education Conspiracy.
The Evil in the curriculum is so blatant, most will wonder why they were unable to see it from Day 1.
Summary
Summary
As a Mechanical Engineer, I can assure you, had we been trained in Statics, Dynamics, Deformables, Fluid Dynamics, Thermodynamics, Vibrations or Differential Equations in a manner comparable to that which Accounting Students were trained, with lingo that was 180 degrees out of phase with logic, reason and truth, we would have never evolved past the wheel.
As a Mechanical Engineer, I can assure you, had we been trained in Statics, Dynamics, Deformables, Fluid Dynamics, Thermodynamics, Vibrations or Differential Equations in a manner comparable to that which Accounting Students were trained, with lingo that was 180 degrees out of phase with logic, reason and truth, we would have never evolved past the wheel.
Find the Bankers who benefitted from this cognitive pretzel and make them pay dearly for the faulty financial education.
Find the Bankers who benefitted from this cognitive pretzel and make them pay dearly for the faulty financial education.
They were the ultimate beneficiaries of all the confusion.
They were the ultimate beneficiaries of all the confusion.
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