“Let there be liabilities!” With this cryptic statement, our MANAC professor asked us to continue with the case. This was the third class, and until this my understanding of the rudimentary concepts had been proper. (Yes! Hard to believe but I can still can proclaim loudly from the rooftops – there was a time exactly 2 sessions – when I understood MANAC!) . After this, well, … Let’s just say I went deeply into the red in the grade sheet.
MANAC stands for Man Can’t, though some benighted souls seem to be believe that it stands for Managerial Accounting. Like wisdom teeth and Australian victories, some things in life just can’t be avoided.
Since there are must be people out there who voluntarily flirt with danger, the following Dummies Guide to MANAC is for them.
1) Balance-Sheets: The remaining paper left in the printer after taking all the printouts you need.
2) T-Account : IOU’s kept with canteen primarily to pay for the copious amounts of beverage students drink is called a t-account.
3) Current Liability: Unpaid electricity bills of yours.
4) Current Assets: Do I need to elaborate more on this?
5) Income statement: The salary slip one used to get at the end of the month while working, leaving one with a pleasurable sense of having achieved something.
6) Liabilities: Your capacity to tell untruths so that the 2 sides balance.
7) Bad debt: Some people struggle to solve acccounting problems. They spend ages and ages and just when they think they’ve nailed it, they notice a negative balance of $1,00,00,000 in the liabilities( refer above) column. They suffer major heart attacks and sometimes even expire. This is known as a ‘bad debt’.
8) Profit and Loss Statement: When you are cold called by the professor, and are at a loss to state what the profit is.
9) Operating Lease, Finance Lease, Please Lease Me: I have no idea what these are so the lease said the better.
10) Capital: This is the most obvious figure that comes in the balance sheet. Or does it come in cash flow statement? Wherever it comes, as every second standard school kid knows, this is New Delhi.
Now that the ground rules are laid, let’s get down to the serious business. In any T-account, you have to put various values in the left and various values in the right. People who can’t differentiate between left and right, don’t fret. Even the people who can differentiate between R and L are not sure if they are right, so don’t feel left behind.
My suggestion is to do what I normally do. Close your eyes and arbitrarily put the value whichever side you want. Look at it this way, you have only a 50% chance of getting it wrong.
One normally has never ever balanced a balance sheet. And doesn’t think one can. Is fairly sure nobody can either. People get pure lucky. ‘Tis a fact of life that one cant balance a sheet without becoming mentally imbalanced.
Now, that you have understood the intricacies of balance-sheets, cash-flows and p & l statements, feel free to go ahead and do some accounting. Please do inform me if you can balance balance-sheets, cash cash flows and profit and loss profit and loss statements. If you can fill a minute with sixty seconds worth of accounts done, then you will be a man, my son!