Book Review: Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports by Thomas Ittelson

I have decided to do  book reviews on some select accounting books. The most recent book I have read is Financial Statements by Thomas Ittelson. Ittelson has an interesting bio for someone who writes a  book on accounting. According to the book “Thomas R. Ittelson is a scientist, businessman, author and teacher with many years of hands-on experience in business development and marketing for technical companies. As a consultant to entrepreneurs, Ittelson has written business plans and prepared financial projections that have helped raise more than $500 million in start-up equity capital. Financial Statements was born from the author’s efforts to teach client entrepreneurs how to design and use financial statements in their start-up businesses.”

I will start off by saying that the last paragraph of his bio is what makes the book great for beginners. Ittelson is not writing this book for sophisticated investors who have extensive knowledge of financial statements. The book is meant  people who know absolutely nothing about accounting. The authors goal is to  teach them how to create their own financial statements. This book is ideal for people running their own business who want to learn how to create balance sheets for their own businesses.

I actually enjoyed reading this book which I can say is almost never the case for any accounting book I read. This is also probably due to Ittelson’s unique background instead of an accounting professor writing a book in a boring manner.

This book is also great for new investors. Ittelson explains in simple terms. To give an example he starts off with Assets=liabilites+ owners equity. Anyone who knows any accounting knows that is one of the most basic equations in accounting. If you want to be a real investor you have to know how to analyze the balance sheet, statement of cash flows, and income statement. This book will not tell you the nitty gritty of analyzing complex financial statements but it will get you started on the path.

The whole book goes through the life of a small company that produces apple sauce.  Ittelson explains how the company purchases equipment, a plant etc. starts marketing and selling its products and finally deciding on future plans to grow the company.

What is great about the author’s book is he goes through a simple transaction and shows how it effects all three financial statements. For example the company buys a $250,000 machine and pays half up front with the rest due after installation. The company now has $125,000 less cash on its balance sheet and $125,000 more of Property, Plants and equipment.  At the same time this transaction shows up on the cash flow statement under PP&E purchases and lowers the ending cash balances. This is just one example of how the author explains to beginners how to read or even construct a balance sheet.

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To purchase this book on click on the following link Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports