Hello Reader,

We've discovered an acronym we hope makes it easier to remember when it comes to becoming financially literate or teaching others on your team to be - ALOE.

ALOE = Assets = Liabilities + Owner's Equity

Aloe vera plants are known for longevity, with some species surviving up to 100 years.

Mathematician Luca Pacioli created the double-entry accounting system and the format for financial statements in the late 1400's.

Over 500 years later, we still use the same accounting principles today.

In addition to each's longevity, you can cultivate a healthy financial outlook by understanding and applying the ALOE formula, much like how Aloe Vera promotes overall well-being.

What is accounting?

Accounting is the act of collecting, organizing, and interpreting financial data.

In business, accounting is known as "the language of business" and is necessary to produce financial statements.

This week, our Executive Director had the pleasure of coaching the launch of The Great Game of Business within an AIBD member's firm.

A large part of that process is learning financial literacy.

It can be scary, but knowing "the language of business" can be helpful for you and those who work for you in your personal and business lives.

At all levels of business, it's important to have everyone on your team speak the same "language."

In this lesson, we will illustrate what happens financially at the office, at its most basic level.

Here's a quick ALOE tutorial:

The Personal Financial Statement itemizes all your Assets and compares them to your Liabilities and Owner Equity.

That's the basis for the ALOE formula.

Assets (A) = Liabilities (L) + Owner's Equity (OE)

More often than not, it's referred to as Equity.

Here are the definitions:

Take, for example, the following use of the basic accounting equation in ALOE accounting.

Let's say you purchase a townhouse for $50,000.

You made a down payment of $5,000 at closing and borrowed $45,000.

Barring any other cash or investments, your total Assets are $50,000.

And, not considering any other debts, your total Liabilities are $45,000.

Remember, A = L + OE, therefore, your Owner's Equity is $5,000

The format for reporting a business's financial statements is the same. However, the terms may be slightly different.

For example, the Personal Financial Statement above is a Balance Sheet or Statement of Financial Position in the business world.

However, the formula remains the same: A = L + OE (aka, Equity or Retained Earnings).

Here's a business example:

A donut shop owner invested $45,000 to open the shop.

The owner owns the building and its land, with $50,000 in total value.

Each month, the owner purchases supplies like sugar and flour on credit from their supplier and must pay a bill of $5,000.

Using this information, the accounting equation is:

Assets = Liabilities + Owner′sEquity, or 50,000 = 5,000 + 45,000.

Both sides of the accounting equation balance - $50,000 on the left side equals $50,000 on the right side.

To learn more (and earn half of a CE unit), visit our Creating Where People Live classroom at Study.com.

Sign in using a Google account or email and set up your Study.com account (it's free to be a student in our classroom).

You might be asked for a "Classroom Code." Use: purple-fly-1389.

You don't have to be a member to experience the lesson. If you've visited our Creating Where People Live classroom before, you may have already received a notification of the assignment.

Once you enter, you'll be taken to the full lesson. The video is short, at 11 minutes, and the five-question quiz should take less than ten minutes.

If you have issues registering for free, try these instructions: https://public.3.basecamp.com/p/kerFhm4P29VcAb6qBoq1nYv1​

Attention CPBDs!

When you complete the lesson and quiz by the due date (January 24, 2025), the A-Team will upload the "Grade Book" to the MyCEApp and award you 0.5 P1 CE credit.

Have a great weekend!
The A-Team

PS - To arrange a 2-hour "FUNancial Literacy" workshop for your office, schedule a 30-minute exploratory call with Steve Mickley at AIBD.org/MeetSteve.