Accounting and finance, explained clearly.

Written lessons

Each one answers a single question with a worked example and sources. Read one on its own, or find its place in the path.

• Part 2 · Topic 06Why assets always equal liabilities plus equityThe accounting equation says that a business's resources equal the claims on them. It always balances because equity is defined as whatever is left of the assets after liabilities. Double-entry bookkeeping keeps the records consistent with that definition, one transaction at a time.
• Part 2 · Topic 08Why debits always equal creditsAssets equal liabilities plus equity before and after every transaction. A debit is an increase on the asset side or a decrease on the claims side; a credit is the reverse. With those definitions, debits equal credits is the accounting equation restated, not a separate rule. A worked month of six transactions shows it entry by entry and in the trial balance.
• Part 3 · Topic 11Why equity is riskier than debt: the residual claimEquity is what is left of a business's assets after its liabilities. A plain loan is a fixed contractual amount, so when the recorded amount of the assets falls and the liabilities do not change, the whole fall lands on equity. For common shareholders, the whole of any rise does too. That is why equity is called risk capital.
• Part 3 · Topic 12Why revenue increases equity and expenses decrease itEquity is assets minus liabilities. Revenue is defined as an increase in assets or a decrease in liabilities from doing the business's work, so taken by itself it must raise equity. Expenses are the reverse. Net income collects the two, and in a corporation retained earnings carries it onto the balance sheet.
• Part 3 · Topic 13Why treasury stock reduces equityTreasury stock is a company's own shares that it has reacquired and holds. US GAAP presents the cost as a deduction from equity, not as an investment asset, and the repurchase itself does not pass through net income.
• Part 4 · Topic 16Why the statement of cash flows has three sectionsThe balance sheet shows cash at two dates but not why it changed. The statement of cash flows explains the change and sorts each receipt and payment by what it was for. A worked year shows the reconciliation, two businesses with the same change in cash show why the split matters, and the US GAAP lists settle the cases people get wrong, such as interest and dividends.
• Part 4 · Topic 17How the three financial statements connectThe balance sheet is a business at two moments. The income statement and the statement of cash flows each explain part of what changed in between. One year of a hypothetical business is traced through all three, and the accounting equation shows why every link must hold.
• Part 5 · Topic 18Why accrual accounting existsA business runs on two timelines: its economic activity and its cash movement. Accrual accounting records the first, so each period's profit reflects the work done in that period. Cash-basis records follow the second, and they can put a month's profit in a month when nothing happened.
• Part 5 · Topic 19Profit is not cashProfit measures accrual performance for a period. Cash changes only when money is received or paid. The two can move in opposite directions in the same period.
• Part 5 · Topic 20Depreciation is not valuationUnder US GAAP, depreciation allocates an asset's cost over the periods that use it. Book value is the unallocated remainder of that cost, not an appraisal.
• Part 5 · Topic 21Why the indirect method adds back depreciation and subtracts receivablesThe indirect method starts from net income and removes everything in it that did not move operating cash in the period. A worked example shows each adjustment, checks the result against the actual cash receipts and payments, and derives the add-or-subtract rule from the accounting equation.
• Part 6 · Topic 23Why a dollar today is worth more than a dollar tomorrowMoney you hold now is money you can put to work now. Waiting for it gives up whatever it could have earned in the meantime, and that forgone return is the time value of money. A worked example finds the amount a later payment must reach before waiting stops costing you.

One path, six parts

The topics run from how a business works to the statements and the decisions they support. 12 of 28 have a written lesson so far; 12 more are taught in Grant’s videos until their written lessons are published.

1. Part 1How businesses workTopics 01–03 · 3 video
2. Part 2Accounting foundationsTopics 04–08 · 2 written · 3 video
3. Part 3Assets, liabilities, equity, revenue, and expensesTopics 09–13 · 3 written · 2 planned
4. Part 4Financial statements and how they connectTopics 14–17 · 2 written · 2 video
5. Part 5Accruals, cash, depreciation, and working capitalTopics 18–22 · 4 written · 1 planned
6. Part 6Using accounting and finance in decisionsTopics 23–28 · 1 written · 4 video · 1 planned

Open the full course outline

Who it’s for

• Students

  Learn the fundamentals in an order you can follow, with a worked example instead of a definition to memorize.

• Accounting and finance professionals

  Sharpen the distinctions underneath the statements you already use, including where a familiar number stops meaning what its label suggests.

• Business owners

  Read profit, cash, and the balance sheet as different measurements, so a single number is harder to misread.

About Grant

Grant Warfield teaches accounting and finance from first principles: what happens inside a business, how that activity shows up in the financial statements, and where an explanation stops applying.

He created Compound School and founded Crimson, a financial advisory firm for private companies. He previously worked in audit at Deloitte. He holds a BS in Accounting from the University of Kentucky and an MBA from the University of Louisville.

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