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This episode discusses similarities between engineers and accountants, and provides a brief overview of accounting terminology.
- Like most engineers, Brian has gone through the process of assigning his engineering costs to a seemingly endless list of expense accounts.
- Accounting is an important function in virtually every business. Today’s episode considers some of the similarities between accounting and engineering.
- Accounting is the collection, organization, analysis, and presentation of financial records relating to an organization’s activities.
- Jeff references the text-to-speech cartoons generated online at xtranormal.com. Apparently, there’s a brief series of these videos dedicated to public accounting (foul language, NSFW).
- There is a difference between accounting and bookkeeping.
- In double-entry bookkeeping, the debits and credits always have to balance.
- The definitions of debit and credit have specific meanings for accountants that are different from the meanings commonly assigned in everyday usage.
- Financial transactions are recorded in ledgers, which may be one of five types: assets, liabilities, income, expenses, or equity. All the individual ledgers are combined to create the general ledger.
- Most financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP).
- Accountants general adhere to the matching principle and the convention of conservatism.
- Financial years do not have to match up with the calendar year.
- Overly conservative estimates of project costs can have negative impacts on an organization’s financial planning.
- Accounting is carried out either on a cash basis or on an accrual basis.
- Billing and payment terms are often much different in industry than what household consumers are used to.
- Accounting activities are typically divided into financial and managerial accountancy.
- Financial reports for publicly traded companies in the United States can be found on the EDGAR website that is run by the Securities and Exchange Commission (SEC).
- Four common financial reports are the balance sheet, the income statement, the cash flow statement, and the statement of retained earnings.
- On a balance sheet, accountants must balance the equation Assets = Liabilities + Ownership Equity.
- A company’s value may exceed its net assets by an amount known as goodwill.
- Depreciation is a means for dealing with an asset’s reduction in value over time.
- Brian refers to the “We’ve fixed the glitch” scene from The Office.
- Costs can be either fixed or variable, and either direct or indirect.
- Indirect costs are often referred to as overhead. The precise method of overhead allocation is a managerial decision.
- Accountants also have to deal with the time value of money.
Thanks to SalFalko for the photo titled “business chart showing success.” Podcast theme music provided by Paul Stevenson