Understanding Financial Statements

Why is it important?
Accounting is often referred to as the language of business, as financial information describes an organisation’s activities, performance, and financial position. This information supports decision-making by managers as well as external stakeholders.

What will happen?
The session introduces the role of financial reporting in organisations and explains accounting as a system for measuring and communicating economic information to decision-makers.

Participants will also examine different users of financial information and their expectations regarding financial reports.

Why is it important?
Profit and cash flow are not the same. Understanding how revenues and expenses are recognised is essential for interpreting financial statements and assessing business performance.

What will happen?
This session explains the difference between cash-basis and accrual accounting and their impact on the income statement.

Through practical examples, participants explore the structure of the income statement and the relationship between business activities and financial results.

Why is it important?
The statement of financial position provides an overview of a company’s assets, liabilities, and equity at a specific point in time. It helps evaluate financial stability and resource allocation.

What will happen?
The session introduces the structure of the statement of financial position and the key concepts of assets, liabilities, and equity.

Participants will also examine accrual-based accounting elements such as accruals and prepayments and their impact on financial reporting.

Why is it important?
Long-term assets and receivables directly affect a company’s profit and financial position. Their correct recognition and valuation are essential for reliable financial statements.

What will happen?
The session explains the purpose of depreciation and introduces common depreciation methods.

Participants will also examine the valuation of receivables and the treatment of doubtful or uncollectible debts in financial statements.

Why is it important?
The double-entry system is the foundation of financial accounting. Each business transaction affects at least two accounts, ensuring balance and reliability in financial records.

What will happen?
The session introduces the accounting equation and its role in recording transactions.

Participants will practice using T-accounts and applying the logic of debits and credits in accounting entries.

Why is it important?
Reliable financial statements depend on the accurate identification and recording of business transactions. Systematic transaction analysis is a core accounting skill.

What will happen?
Participants analyse different business transactions and determine their impact on accounts.

The session also demonstrates how trial balances are prepared and how they support the preparation of financial statements.

Why is it important?
At the end of an accounting period, adjustments are required to ensure financial statements accurately reflect the company’s financial performance and position.

What will happen?
The session explains key accounting principles and the role of adjusting entries in financial reporting.

Participants will practice recording adjustments related to accruals, prepayments, depreciation, and other period-end corrections.

Why is it important?
Business growth and investment depend on financing decisions. Managers must understand the roles of equity and debt financing and their impact on risk and financial structure.

What will happen?
The session introduces the nature of limited companies and key sources of business finance.

Participants will explore concepts such as shares, dividends, loans, and venture capital and their role in corporate financing.

Why is it important?
Financial statements provide a comprehensive overview of a company’s performance and financial position and support managerial and investment decisions.

What will happen?
The session explains the structure and preparation of key corporate financial statements.

Participants will also examine the statement of changes in equity and the relationship between profit, dividends, and retained earnings.

Why is it important?
Profit does not necessarily mean sufficient cash. Companies must maintain liquidity to sustain operations and support growth.

What will happen?
The session introduces the structure of the statement of cash flows and the three categories of cash flows: operating, investing, and financing activities.

Participants will analyse the differences between profit and cash flow and examine the role of working capital in cash management.

Why is it important?
Financial statement analysis helps evaluate profitability, liquidity, and operational efficiency.

What will happen?
Participants learn how to calculate and interpret key financial ratios used to assess business performance.

The session also discusses how ratios can be compared over time and across companies.

Why is it important?
A company’s capital structure affects financial risk and investor returns. The balance between equity and debt financing is an important strategic decision.

What will happen?
The session introduces capital structure analysis and financial indicators used to evaluate financing decisions.

Participants will also calculate and interpret investment ratios such as earnings per share, price-earnings ratio, and dividend yield.

Why is it important?
Inventory valuation directly affects a company’s profit and financial position. Proper accounting ensures reliable financial reporting.

What will happen?
The session introduces inventory accounting principles and inventory systems, including periodic and perpetual inventory methods.

Participants will learn how to calculate cost of goods sold and apply inventory valuation methods such as FIFO and weighted average cost.

• Bachelor’s degree or equivalent qualification.
• At least 3 years of work experience in business or entrepreneurship
• Valid temporary residence permit or EU citizenship.

Upon completion of the course, the student:

1. Associates accounting with other business functions in a contemporary organisation. (Knowledge)
2. Explains the context and purpose of financial accounting and the importance of ethics in accounting. (Knowledge)
3. Prepares and interprets basic financial statements for sole traders and limited companies. (Application)
4. Applies basic concepts, systems and methods to solve accounting problems in small teams. (Social)
5. Identifies different stakeholder expectations to financial reports. (Individual)
6. Communicates basic financial statement information to internal and external stakeholders. (Transferable)

To successfully complete the course and receive a certificate, participants must actively participate in sessions, complete independent assignments, and submit a final exam.

The course takes place at EBS’s modern campus in Tallinn, Lauteri 3. Students have access to ergonomic classrooms, the EBS library, and the cloud-based Canvas learning platform. The study process is supported by online tools such as Zoom, MS Teams, or Canvas Conference. Free Wi-Fi is available throughout the building. On-site attendance is required.