the abovementioned articulation by using a proper graphical exhibit. Finally the most important financial ratios are described as a means of financial statement analysis and interpretation.
2.1 THE ACCOUNTING EQUATION
Any aspiring financial modeller should be familiar with the basic accounting principles and how they are reflected in the so-called financial statements. Financial statements are standardized forms developed by accountants and financial managers in order to record business transactions. They follow the fundamental principle of accounting: matching costs and expenses with the revenues they have created. In order for costs and expenses to be matched with revenues, accountants devised what is known as the double entry system of accounting. In other words, every transaction is listed in 2 places. Double entry accounting is largely attributed to the Italian mathematician and Franciscan monk known as Luca Pacioli who lived from 1445 to 1517. Pacioli is credited with the first publication of the “Venetian method” of keeping accounts, a system for maintaining financial records.
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