Crash course on the 3 financial statements

MJP338's picture
Rank: Orangutan | 278

Does anybody know a good book - that isn't 700 pages or a textbook - that could give me a good working knowledge of the three financial statements?

Basically, I want to be able to ace any SA IBD interview questions regarding the financial statements.

I do have the WSO and vault guides, and have looked around ibankingfaq.com, but I want a working knowledge, not just memorized answers.

Thanks

Comments (23)

Feb 18, 2010

Those guides, combined with a couple of accounting classes, should be enough to get you through any SA interviews accounting-wise, I would think. The big thing, at least in my experience, is just to know how changes in each statement affect the others and then how they would affect the big picture in terms of cash flows.

Knowing how each of the statements works and being able to create a BS, SCF, and IS is something that is definitely learned with repetition and or class. Just doing practice problems is really a good way to ingrain the way the statements interact with and reflect each other. For instance, knowing how to do the three cash flows for the SCF is helpful because then you see why changes in, for example, depreciation or net income, as reflected on the Balance Sheet or Income Statement, flow from the original statement to the SCF.

Feb 18, 2010

Yup - But, I haven't taken any accounting classes. I am looking through a couple of textbooks, but there seems to be so much unnecessary information. I just want to know how a change in x, y, or z would flow through everything.

Feb 18, 2010

Want a crash course? GRAB A 10K...

Feb 18, 2010

lol srry you can't learn accounting in a day

Feb 18, 2010

M&I interview guide has a few questions with clear answers to see how the changes affect each statement.

Feb 18, 2010

Anybody with helpful information is welcome to respond.

Feb 18, 2010

Sorry bud, just not sure that you can learn accounting without memorization, especially quickly and without having any background whatsoever. I only say this because the key to understanding it is in the repetition, especially with accounting. Without doing a bunch of problems or "studying" 10K/Qs for a while, you aren't gonna do better than simple memorization. That being said, the memorization is important, especially to begin with, because it might as well be a foreign language.

Feb 18, 2010

"What we hope ever to do with ease, we must learn first to do with diligence."
-Samuel Johnson

There are no shortcuts, son.

Feb 18, 2010

Sorry, I have t oagree wit hthe above. Acct is a foreign concept. Def. not rocket science, but it takes a little sudying to grasp. The bare minimum you need to do to learn the basics would be to read the first few chpts of an intro book - learn 1. the idea of a dual entry system, 2. cash vs accrual acct, and 3. what the 3 stmts are and how they link together. These are usually the first chpts or an intro text. I don't know any other way to really learn these basics without a class, or at the very least a full-on textbook (not some dinky manual).

Feb 18, 2010

I guess one specific question I have:

If a company has a factory recorded under PPE at a value of 100, then sells it for 50, how would it flow through?

Feb 18, 2010

Rome wasn't built in a day.

If you try to learn accounting in 2hours just for an interview, the associates will be able to see right through you. Buy the Wall Street MBA by Reuben Advani and check out the online courses from NYIF (New York institute of Finance). They are like $100 each.

Feb 18, 2010

Is there any depreciation on it (ADA)? (I would assume there would be)

You'd have to find book value of the asset (Factory) and then figure out if there is a gain or a loss. This gain or loss is subtracted or added (to have the effect canceling out the affect to NI) to CF from Operating. Also, the balance sheet will show a lower ADA and PPE. It will also run through to the IS by the addition of the Depreciation for the year up until the point the asset is sold.

Feb 18, 2010

try the ibankingfaq.com and learn the answers to the technicals (hopefully if they ask anything from there, you'll be prepared)

Feb 18, 2010

LG - thank you for the info.

dco - can you talk a little more about this part:

"This gain or loss is subtracted or added (to have the effect canceling out the affect to NI) to CF from Operating." ?

Thanks

Feb 18, 2010

In my opinion your best off getting a hold of the financial statement analysis book for the CFA level 1, they are probably dirt cheap for older additions on craigslist. Its text, and its dense, but it will give you a very good basic understanding, and you will thank me later.

Feb 18, 2010

Try this:

http://www.accountingcoach.com/online-accounting-c...
Not perfect, but it can walk you through the basics.

Feb 18, 2010

I have a very good book for this purpose:

I used in the 1st few weeks of a MSF Valuation class, its an oblong red paperback

I think the Title is something along the lines of : Reading Financial Statements

subtitled: Wringing out the information from the numbers, ..something like that

If someone else has read it they can clear up the details, it has 2 hands wringing out a towel on the front

Feb 18, 2010

Yea, no problem. If you recognize a gain or loss on the sale if an asset, it will affect the CF from Operating as this will be double counted by the net income. As a result, for CF from Operating section of SCF, you start with NI, then add back Dep. and Amort., and subtract of any gains from sale of assets or add back any losses, then you go on with the normal entries for the statement by looking at the change in Balance Sheet accounts.

Feb 19, 2010

Thanks all. Much appreciated.

Feb 19, 2010

Depends how much you already know. If you're pretty new, I'd check this book out first: http://www.amazon.com/Financial-Statements-Step-St...

Feb 19, 2010

I saw this posted on here quite a while ago. This is very basic but, depending on how much you already know, it could be helpful.

http://www.baruch.cuny.edu/tutorials/statements/vi...

Feb 19, 2010
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