Published by: Julia
Whether you are business owner or a student studying the subject you will benefit from Coursera´s Introduction to Financial Accounting course. Read on to find out what you will learn.
Why you cannot ignore financial accounting
Almost unbelievably, around 82% of US businesses go bust because of problems with their finances. This is a crazy figure.
Even worse, in many cases, the firms that go bust actually do sell profitable products and services. Just not at a consistent enough rate to enable them to tick over throughout a full financial year. When sales slow they go bust.
Often, the reason this happens is that the owner does not fully understand how business finances work. They tend to think that hiring a good accountant is all they need to do. This helps a great deal, but if the advice they give goes right over your head you can still easily go bust.
This financial accounting course provides knowledge that every business owner should have. The tools they need to understand the basics of financial accounting.
Who is this course suitable for?
It is a fairly comprehensive course, but not one that will overwhelm you. There is just enough detail to give you a headline view of financial accounting, so you know enough to be able to understand what data you can use to make a sound business decision. So, it is a course that is suitable for any business owner.
But, it has mainly been produced with students who want to become business accountants or work in the field of finance, in mind. For them, this is very much a stepping-stone that provides them with the foundation knowledge they need to take things further.
This course is full of real-world examples. Making it is easy to follow and apply what you learn to your own work.
What you will learn from the Coursera Introduction to Financial Accounting course
The course is taken over a period of 4 weeks with assignments and homework for each one. It was possible to attempt each assignment twice giving you the chance to recognize and learn from your mistakes. There are two exams to take too.
Coursera says that most students spend between 5 and 8 hours completing this course successfully. However, I suspect that you could easily double that time. You will have to go over a few things several times and if you are new to the subject some of the reading will be heavy going.
There are 29 videos to go through, 20 readings, and 6 quizzes. Plus, if you want the certification you will also have to complete a final exam.
These are the main subjects that are covered:
- What a balance sheet is and how they are produced
- Understanding income statements
- An overview of business finances
- What debit-credit bookkeeping is and how it is used
- An overview of balance sheet equations
- How to read and use a balance sheet
- Using cash flow statements
- How to prepare internal books to produce accurate financial statements
- Understanding cash flow
- What the differences between earnings, cash for operations, EBITDA and free cash flow are
- Understanding ratio analysis
Here is a quick overview of each section, to give you a better understanding of what you are going to learn when you take this course.
What are balance sheets and how to use them
When you dive into this first section you soon realize that this is not going to be a boring, dry course about accounting. Something I really appreciated. It helped me to overcome the overwhelming feeling I had that most of the course was going to go right over my head. It really is a foundation course, so Professor Brian J Bushee starts with the fundamentals. He explains why you need to keep sound accounts, which authorities do what, and goes over some of the vocabulary he will be using. He then covers the following topics:
- What is financial reporting
- A real-life example
- What the balance sheet equation is
- An overview of assets, liabilities and stockholder equity
- Bookkeeping (debit and credit)
- A real-life example of an annual report
- A case study that pulls together everything covered so far
This section of the course is easy to follow. It covers the kind of business accounting most people are already familiar with. The things you need to know to keep your books straight and to be able to file your taxes.
What is accrual accounting
Put simply accrual accounting is balancing your expenses with your revenues. It sounds simple enough, but there were a few things that caught me by surprise and made me think about my understanding of how to track the cash that goes through a company. In this section you are taught:
- How to fully understand revenues and expenses
- How the figures can be fudged and why this is fraud
- How to adjust entries
This subject can be quite complex. For example, is the cost of runnig the CEO´s car part of the product cost or a periodic cost? You may think you know the answer, but when you take the course you will see that it is not as clear cut as you think.
Understanding your income statement
Knowing how to properly interpret an income statement is vital. So I was pleased to see this covered in great detail.
- What is the conservatism approach and how it protects your business
- How to understand your financial statements and closing entries
- Practice examples for you to test your understanding
Professor Bushee does a couple of things differently from many of the other teachers on Coursera, which I liked. One example is the way he enables you to test your understanding as you go through each video rather than having to wait until the end to take the quiz. I personally found this to be a better way of learning.
If you want to learn more about the additional assets that are provided with each Coursera course, you can do so by clicking here.
Cash flow and how to use it to stop you from going bust
Understanding your cash flow is vital. If you see periods of time coming up where your business is going to be short on money you can take steps to cover the gap. For example, by seeking a loan, or maybe even borrowing against some of your invoices.
In this section, Professor Bushee explains tricky things like how to decide whether an investment should be categorized as an operating activity or an investing one. He also covers how to deal with financing activities.
A brief overview of ratio analysis
Using ratio analysis you can uncover potential issues with a business. Including liquidity, efficientcy, and how profitable it is. This is a good skill to have whether you are a business owner or an investor. Understanding ratio analysis provides you with a way to accurately assess risk.
What I thought of professor Bushee´s Coursera course
All-in-all this is an excellent course, which is surprisingly enjoyable. Professor Bushee´s use of cartoon characters that ask some of the questions you are likely to have is kind of quirky, but also very effective.
More importantly, by the time you have completed the course, you really do have a good grounding in the basics of business finances. However, you will likely l still need to take a few further accounting courses, like this one, to flesh out your knowledge enough.
You may also want to consider signing up for the specialization of which this course is a part. Taking the 6 courses all together will improve your understanding of everything you have been taught and give you a great overview of what it takes to run a business.