The basic accounting equation is as follows.
Assets = Liabilities + Owner's Equity
Assets and Liabilities are clear enough. But what is owner's equity? So we expand it to be more meaningful.
Assets = Liabilities + (Paid-in Capital + (Revenues – Expenses) – Dividends – Treasury Stock)
Assets-Liabilities = Paid-in Capital+(Revenue-Expenses)-Dividend-Treasury Stock
There is a little caveat. While Assets, Liabilities, Paid-in-Capital, and treasury stock are a point-time, revenue and expense are for a period. So Revenue and Expenses have to be at a point-in-time as well which is typically year-to-date. Dividends are slightly different but they need to be Year to Date as well.
Revenue-Expense is actually Net Income but you have to use the year to date metric.
So a dashboard which looks as follows will give a lot of confidence to the accounting and finance staff as it meets the accounting equation requirement.
| Metric | Period Type | Amount |
|---|---|---|
| Assets | YTD | 300 |
| Liabilities | YTD | 250 |
| Assets-Liabilities | YTD | 50 |
| Paid-in Capital | YTD | 100 |
| Revenues | YTD | 100 |
| Expenses | YTD | 80 |
| Dividends | YTD | 20 |
| Treasury Stock | YTD | 50 |
| Paid-in Capital+(Revenue-Expenses)-Dividend-Treasury Stock | YTD | 50 |
In this case, the assets less the liabilities equal the total of Paid-in Capital+(Revenue-Expenses)-Dividend-Treasury Stock. In any case, the accounting staff is going to check these numbers on their favorite calculators.
So from a BI perspective, if you can design a high level dashboard that meets this requirement, you have won the trust of the accounting and the finance people. It makes the reporting meaningful and it saves a lot of trouble. You could actually test your dashboards for Financial accounting data with this simple equation.
When I build these dashboards, I use this to ensure that I QA the data and if it does not add up, you know you have work to do.
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