BUSI 170 - Financial Analysis for Leaders (Section 1.1)
August 19, 2026
Accounting is one of the most hated, dreaded classes that people think about. Even people in business hate it. So let me say this at the top: this is probably not going to be your favorite business class. I would rather tackle head-on why you should learn it than pretend otherwise.
I was an accounting major. I took no less than 14 different accounting classes, starting at level one, and it is a lot to approach. The people who become professional accountants learn it in a methodical, step-through way. When you build a house, you pour a specific foundation. They learn a lot of terminology. They understand the mechanics of debits and credits, and on that foundation they build a greater and greater, more and more nuanced, richer accounting system. That is genuinely the right way to do it, for them.
Most of the people teaching accounting are professors of accounting. They went through all of that education and more. They learned it by building from the foundation up, incrementally, piece by piece. And then they are handed a different task: how do I teach someone who is only going to take one or two accounting classes what they need to know for this to be useful to them?
Very often this is how it fails. Intro is just pouring the basement, and that is a lot of work. It is drudgerous, and the only thing people learn coming out of it is some terminology and the fact that they hate accounting.
It is no surprise to me. They have not been able to do anything fun yet. They never get to see what happens when you build up the house, at the higher level, where your thinking gets stronger and your communication gets better. They spend all their time pouring a foundation, and then they stop.
I do not want to leave you with the impression that the traditional material is a waste, so let me be fair to the foundation.
The single dumbest thing I was ever made to memorize in an accounting class was debits and credits. Debits are just a convention of where we look at accounts. There is a left side and a right side. For assets, debiting is the increase and crediting is the decrease; for liabilities it is the opposite. Things have default debit or credit balances depending on what type of account they are, and we just memorized it: left side, right side, left side, debit, right side, credit. It was completely arbitrary, cumbersome, and unintuitive to use. It is also confusing, because credit always seemed like it should be good, and it was not good - it was a decrease or an increase depending on which account you were in.
But you used it. By memorizing that convention you could talk through, in shorthand, the mechanics of how things hit different accounts - how one event has an impact on two accounts in a way that is somehow offsetting. We make two entries every single time something happens. At least two accounts get hit, and it always has to balance. That self-checking procedure, enabled by an arcane technical language, made it much easier to see what was going on.
It was tremendously useful scaffolding. Like training wheels, once you understand it, you do not need it anymore.
What I object to is spending a year on the terminology before you get to use it for anything.
Think of this book as the hacker approach, and it requires a hacker mindset. We are not going to build a deep conceptual foundation from the ground up over 14 classes. We are going to start with the problem in front of us and ask: what do we have to know in order to solve this, and how do we know this is a reliable way of doing it?
Here is what that looks like.
Say we spend a lot of money on a machine. Should we expense it right away this month, or should we create an asset and then, over each month, depreciate it little by little?
We could go through all the theory of what an asset is and when you capitalize something versus expense it. We could talk about the tax rules and the audit rules, what substantiates an asset, what the thresholds are. We could spend months on the regulations before we take our first action.
What I want you to do instead is make a quick decision and put it down. Write it, book it, look at the financial statements, and then ask: because we booked it this way, what might we be missing? What is going to be hidden?
Then work it through. If you capitalize something that should have been expensed, it goes on the balance sheet and stays off the income statement, so you overestimate your profits and probably your assets too. That does not seem to be what is going on. Now flip it. If you expense a long-lived asset right away, you have a big mismatch. You spend all that money up front, and if you match all of it against the revenue of one period, you get a massive loss that is a distortion. It is also a distortion for every period after, because by leaving the expense out you no longer understand what it actually takes to earn that revenue.
Only then do we ask what rules would make this work. That is what I mean by leading with the problem. Get a solution, look at it, think about what is wrong with it, rather than absorb the full set of rules for every possible contingency and then implement it for the first time.
It is messier and it requires some flexibility. It also lets you enjoy the fruits of your insights immediately, starting from a question you can intuitively understand matters.
I want to be straight about the tradeoff.
Professional accountants learn the mechanics first. They follow the rules for the first three or four classes, learn the system of accounting and how to replicate it, and learn how to read financial statements by learning how to create them. We learn how the engine works by building the engine over and over and over again, and that is an amazingly strong foundation. It is muscle memory. So when someone asks “why did you do that?”, they are not tripped up by what just happened, because they know the standard. If something deviates from it, they know that too, and they know what problems it causes. They get to jump straight to the interesting part - arguing about whether the treatment tells the right economic story for the question in front of them.
I think that is awesome. The issue is that most people do not have time for that education, and they still need to know something about accounting.
The problem with the hacker approach is that you are never fully tethered to something strong and stable, a firm foundational base of how accounting works. You are learning it while you are learning to question it, and that leaves us unmoored. We have to be careful about spinning around and chasing our tails down the wrong rabbit hole, because the level of our fundamental knowledge is thin at the same time we are trying to interrogate what the information means.
At the end of this book you are going to have some holes. There will be times you make mistakes. You will not have the fundamental basis to give well-grounded judgments in every situation. You will still be loose, and you will have more questions.
What I hope you will have instead is the cycle: start with a problem, apply what you know, work out what questions to ask, and know enough to draw in an expert with a real question rather than being totally clueless. You can bootstrap your knowledge from there.
Read it straight through, in order, while you are doing the problems. And whenever you have questions, stop and ask.
Accounting is like riding a bike. You learn it by doing it - by doing it, talking through what you did, answering questions you have to answer, taking challenges on it, and explaining the story. You get reps. No book gives you that.
So read the minimum you need to take an educated swing at something where you are not one hundred percent blind. Then swing. The learning is in the enacted doing, the presenting, the taking of challenges, the rethinking, and the coming up with a new draft. That is the real engine, more than the reading. It is something we learn by doing, like a language.
Expect confusion. It would be more logical to build everything you need to know and then present you with situations, and we are deliberately not doing that. We are going to practice things and try things and sometimes get them wrong, then iterate, reflect on how that worked and how we can do better, and repeat. We will ask “so what?” a lot.
Some people find this annoying, because what they want is to be told everything they need to know up front. It is like packing a bag so that when a situation comes up, you are ready for it. We are deliberately not doing that, because it takes way too long and it is less fun.
This class can also be a grind. There is terminology we have to hit, there are some basics to memorize, there are formulas. But I want to get into this being interesting right away and useful right away, and get us doing things rather than absorbing a lot of conceptual principles before we ever see them applied.
You need to understand accounting the way doctors need to understand anatomy. These are the mechanics of how value gets created within a business. That is exciting to know in and of itself, because it is a beautiful conceptual thing that lets you see the world differently, and pragmatically it also helps you make better decisions. Without it we are groping forward, working way more inefficiently, not sure what we are doing.
Usually when I am at a party and someone finds out I teach accounting, they look at me like someone they do not want to talk to anymore. You can see it in their faces. It has got to be boring. This topic would be boring. This person must be boring. I usually do not tell people, because it is not a great topic of conversation. But it really is a secret power that only people who have it know about.
When you talk to other people who know how to read financial information, they are relieved that you are a person they can talk to. Not because you share the same lingo, but because they immediately make assumptions about the kind of insight you can have into any given organization. You are in the guild. Without it, everything has to be dumbed down and translated, and translating without numbers is imprecise. It is more cumbersome, you have to say a lot more words, and it is easier to be wrong.
The fun part comes when the rules and the procedures and the terminology fade into the background and become part of your normal conversation. You start seeing things in a business in a whole new light. Someone describes an activity and you immediately think about how it translates into financial impact, and you get a rush, because you have the intuition that this thing is a big deal, given the magnitudes it moves. And what is a small deal? That is the same skill running the other way - knowing you can comfortably de-emphasize something because you know it is not where the biggest impact is going to be. Just having that confidence is the fun part.
That is what I want for you by the end of this book.
© 2026 Eric Lin. All rights reserved. This chapter is provided for students in BUSI 170 - please do not repost or redistribute without permission.