From the course: Accounting Foundations: Understanding the GAAP (Generally Accepted Accounting Principles)

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Recognizing and measuring financial statement elements

Recognizing and measuring financial statement elements

From the course: Accounting Foundations: Understanding the GAAP (Generally Accepted Accounting Principles)

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Recognizing and measuring financial statement elements

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- When you're trying to get to know someone, you ask them questions, right? And you might ask questions like, "What do you do?" or "Where do you live?" If your daughter has brought home a prospective partner, you might get a bit more inquisitive and ask, "How much money do you make?" "Do you have a home, a car?" "What are your goals?" It's tough to be my daughter. My point, though, is that we should be equally inquisitive about a business's financial performance. Let's create a set of questions we would like to ask, especially if we are going to invest our hard-earned money in that company, or maybe we have a job opportunity with that company. In that context, what do we want to know? "What do you own?" "Who do you owe money to?" Yes, but let's rephrase that to "What are your business's resources and the claims to those resources?" "How much do you make a year?" Also important to know, but let's narrow that to,…

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