How to Read a Balance Sheet
Full Review

Reviewed by: Ma. Bernadette T. Ratcliffe, Senior Vice President, Planters Development Bank, Philippines
Review posted 14 February 2006
Review No. 68

CD-ROM Information

Content: This CD-ROM is a highly effective learning tool for understanding and analyzing the balance sheet, sources and uses of funds statement and a profit and loss account.
Publication Date: 14 January 2002
Audience: Because the program is offered in English, French, and Spanish, the course targets a broad base of users worldwide; from undergraduate and graduate business students to first-level financial and credit analysts, non-financial managers, board directors, and shareholders. The course is suitable for either individual or group study, and also serves as a refresher course on basic accounting knowledge. The CD-ROM may also be a practical guide for small business entrepreneurs wanting to develop the financial skills needed to grow and better manage a business.
Producer: International Labor Organization (ILO)
Size: 626 MB
Price: CHF 25
Manual needed: No
How to order:

Order online.*

Order by mail:
ILO Publications
4, route des Morillons
CH-1211 Geneva 22
Switzerland

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Full Review

Content

The CD-ROM is divided into three parts. Part one is a must-read introduction on how to navigate the program. It is divided into four sub-sections:

1. "Preface to the Second (Revised) Edition" discusses additions to the new version of the text, the purpose of the program, the targeted audience and basic accounting principles that govern the structure and information content of financial reports.
2. "Technical Data" guides the user on how to pace the study program.
3. "How the Programme Works" describes how to answer the work sets and mini tests in each chapter. The "Important Note" at the end of this part suggests study approaches to help users get the most out of program content.
4. "Progress Work Sheet" allows students to monitor and view individual progress by recording work set and test results. The progress worksheet is accessible from each page.

Part two is the program core consisting of seven learning chapters.

Chapter 1: An Introduction presents relevant accounting concepts and principles and the basic structure and components of the balance sheet.

Chapter 2: The Investment Side of the Balance Sheet – Assets discusses the types of assets, their liquidity, and corresponding valuation in the balance sheet.

Chapter 3: The Funding Side of the Balance Sheet – Liabilities presents what makes up outside liabilities and shareholders' funds.

Chapter 4: The Over-all Balance Sheet expounds on the financial structure of the balance sheet and how this relates to the Sources and Uses of Funds Statements.

Chapter 5: Measuring Solvency and Liquidity explains what to look for in the balance sheet when evaluating a company's solvency and liquidity.

Chapter 6: Profitability discusses in detail the Profit and Loss Account and how it is used to measure the profitability and valuation of a firm.

Chapter 7: Assessing the Balance Sheet describes how to determine the accuracy and reliability of the balance sheet. The chapter also presents the limitations of the balance sheet in presenting the financial state of a company.

Each of the seven chapters is divided into two or three subject sets with concepts and learning points discussed in a summary, an interactive work set, and an informative video presentation in some cases. While the summary and video acquaint users with the general topic at hand, key concepts and principles are explained more specifically as users complete work set frames with responses. As each question is answered, users can immediately learn the correct answer by clicking the "Show Answer" button in the far right column of the question. With the exception of the first chapter, all chapters end with a mini-test to evaluate learning progress and determine whether users are ready to move on to the next chapter. Once a work set or quiz is complete, users can record the results in the "Progress Work Sheet."

Part three of the program is made up of a final quiz, a technical note on inflation accounting (Annex A), and a glossary of accounting terms and phrases (Annex B), all of which serve as valuable supplementary materials to the program. The final quiz is a set of multiple-choice questions that covers everything taken up in the seven learning chapters. While Annex A introduces the user to inflation accounting and how it is applied in some countries and businesses, Annex B provides a comprehensive yet understandable reference for accounting and business terminology.

Overall the CD-ROM is an exemplary accounting skills training program and reference tool to learn how to understand and analyze a balance sheet, a sources and uses of a funds statement, and a profit and loss account statement. The summary write-up, work set, video, and glossary clearly explain accounting concepts and principles in a language that can be readily appreciated and understood by non-accountants and those new in business.

Because of its broad target audience, the CD-ROM could be further enhanced by adding discussions on the differences in balance sheet content and structure between manufacturing, trading, and service companies, particularly in Chapter 2. For example, presentation and valuation of inventories and fixed assets differ among these types of firms and it would be useful if such variations were explained in the program.

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User-Friendliness and Navigability

The CD-ROM is very user-friendly and easy to install. It runs automatically when inserted in the CD drive. A "Table of Contents" is included on the opening page and clearly guides the user to the section on "How the Programme Works." This section has interactive instructions that function in the same way as the course work sets which gives users a "hands on" interactive tutorial that is easy to follow and remember.

The "Menu Option" facilitates movement between screens, work sets and chapters. The four buttons on each page function as an alternate navigation tool. The "Show Answer" and "Show All" frames are excellent features that provide instant feedback to users once an answer completed. There is a link to the "Progress Work Sheet" at the end of each section that encourages prompt recording of the work set or mini test results. Even though the program suggests an estimated completion time for each work set, users can set an independent learning pace.

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Interactivity

The highly interactive work sets and mini tests allow users to actively participate in the learning process. This interactive element of the program both reinforces the course content and encourages users to remember and employ key discussion points when completing the exercises. As users see improvement in work set and quiz scores on the progress work sheet they become more confident with using the concepts and language of business accounting. In this way the interactivity of each set and each chapter not only encourages active participation but most importantly, keeps users focused on the program from start to finish.

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Distribution

The CD-ROM can be ordered online through the ILO Publications* website or by mail. Considering that the CD-ROM is a skills training program that can be used individually or by a group, the cost is reasonable and worth the investment.

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Sustainability

There has not been much change in the content and structure of the financial balance sheet and its associated financial reports over the years. However, accounting principles and financial statement presentations have recently undergone significant changes because of the adoption of International Accounting Standards (IAS). It may therefore be appropriate to update the program to include IAS terminology in the glossary and possibly an additional annex on these new standards. This would measurably increase the CD-ROM’s sustainability.

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