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Introduction - Pg. 3

Introduction Many non-nancial managers have an accounting phobia ...a nancial vertigo that limits their effectiveness. If you think "inventory turn" means rotating stock on the shelf, and that "accrual" has some- thing to do with the Wicked Witch of the West, then this book's for you. Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports is designed for those business professionals (1) who know very little about accounting and nancial statements, but feel they should, and those (2) who need to know a little more, but for whom the normal accounting and nancial reporting texts are mysterious and un- enlightening. In fact, the above two cate- gories make up the majority of all people in business. You are not alone. Financial Statements: A Step-by-Step Guide to Understanding and Creating Fi- nancial Reports is a transaction-based, business training tool with clarifying, straightforward, real-life examples of how nancial statements are built and how they interact to present a true nancial picture of the enterprise. We will not get bogged down in details that get in the way of conceptual under- standing. Just as it is not necessary to know how the microchips in your computer work to multiply a few numbers, it's not necessary to be a Certied Public Account- ant (CPA) to have a working knowledge of the "accounting model of the enterprise." Transactions. This book describes a sequence of "transactions" of our sample company, AppleSeed Enterprises, Inc., as it goes about making and selling delicious applesauce. We will sell stock to raise money, buy machinery to make our prod- uct, and then satisfy our customers by shipping wholesome applesauce. We'll get paid and we will hope to make a prot. Then we will expand the business. Each step along the way will generate account "postings" on AppleSeed's books. We'll discuss each transaction to get a hands-on feel for how a company's nan- cial statements are constructed. We'll learn how to report using the three main nancial statements of a business--the "Accounting is a language, a means of communicating among all the segments of the business community. It assumes a reference base called the accounting model of the enterprise. While other models of the enterprise are possible, this accounting model is the accepted form, and is likely to be for some time. "If you don't speak the language of accounting or feel intuitively comfortable with the accounting model, you will be at a severe disadvantage in the business world. Accounting is a fundamental tool of the trade." Gordon B. Baty Entrepreneurship Prentice Hall, Englewood Cliffs, NJ, 1990 --3--