In the midst of my recent seminar about reading and discussing financial statements, I made a rare, spontaneous decision. Instead of simply explaining how accrual accounting works, I picked up a piece of paper, created a 100-yen IOU note, and handed it to one of the attendees.
I then drew up her personal mini-balance sheet on the whiteboard and recorded her new asset: a 100-yen accounts receivable entry. Next, I swapped her IOU for an actual 100 yen coin. “Although the amount of your reported revenue remains unchanged, only now do you actually have cash,” I stated. “This is why we need a cash flow statement…”
I don’t usually like to deviate from my lesson plans, but when given a choice between show or tell, I always go with show. It’s almost always a more effective and memorable way to explain something.
So to continue in the spirit of showing instead of telling, check out the video below for an excellent example of what I’m getting at: