Accounting from first principles
Learn accounting by running one coffee shop for one month.
Sales, costs, profit, cash, assets and growth, taught with a single $4 cup of coffee. No debits and credits until the ideas make sense on their own.
Accounting from first principles
The Coffee Shop Ledger
One shop. One month. Every idea you need.
How the book teaches
One picture per idea. Then you never forget it.
A tall tower looks impressive. The long thin bar holds twice as much. That single image is how you'll remember why a supermarket with thin margins can out-earn a boutique with fat ones. Every chapter works like this.
Most accounting books start with the rules. This one starts with a cup.
One running example
Every number in the book comes from the same shop, and every number connects to every other. Change the price of milk and you can follow it all the way to the return on capital.
Ideas before vocabulary
You see why a cost behaves the way it does, then learn its name. The words stick because they label something you already understand.
Short on purpose
Nine chapters, about a page or two each. One idea, one picture, one rule and one question to check yourself. You can finish it in an evening.
What's inside
Nine chapters. Nine rules.
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Sales
Price × cups. Sales is an area, and there are only two ways to grow it.
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Cost of goods sold
Every cup carries its own cost. What's left is the number everything else is paid from.
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Operating costs
Rent doesn't care how many cups you sell. Why fixed costs magnify every change.
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Fixed assets
The $36,000 espresso machine. Buy once, expense slowly: depreciation explained.
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Working capital
Beans on the shelf, customers who owe you, suppliers you owe. Money that's stuck.
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Profit is not cash
Profit is an opinion; cash is a fact. The most important idea in accounting.
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The balance sheet
What the shop owns, and who paid for it. Why both sides always match.
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Return on capital
Margin × turns. The one score that lets you compare any two businesses.
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Expansion
Break-even, and where the money for shop #2 comes from. Growth is limited by cash.
From chapter 3
Out of $12,000 in sales, the owner keeps $1,400.
Most of the money is spoken for before the owner sees any of it. That creates operating leverage: because these costs are fixed, a small change in sales or costs makes a large change in profit.
If the rent goes up by $1,000, profit falls from $1,400 to $400: a 71% drop.
The whole shop, by the last page
You'll be able to explain every one of these numbers.
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$12,000
sales in a month
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$1,400
profit
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$2,000
cash, and why it's different
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45%
return on capital
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84
cups a day to break even
Written for
People starting a business
Know your break-even and your cash needs before you sign a lease.
New investors
Read an annual report and see the coffee shop inside every company.
Students
Get the intuition first, so the textbook finally makes sense.
Anyone who nods along in meetings
Margin, working capital, return on capital: stop guessing what they mean.
Read it tonight.
$5
Priced at one cup of coffee.
- 15-page PDF, designed for phone, tablet and print
- 9 chapters, each with one picture and one rule
- 9 exercises, with worked answers
- A one-page cheat sheet of the whole shop
Instant download.
Questions
Do I need any accounting background?
No. The book assumes you can multiply and that you've bought a coffee. Everything else is built from there.
How long does it take to read?
It's 15 pages. Most people can read it in an evening, and doing the exercises takes a little longer.
Is this real accounting or a simplification?
Real accounting, with tax and interest set aside so the core ideas stay visible. The rules are the same ones in any company's financial statements.
The examples are in dollars. Does that matter?
No. The ideas work the same in any currency. Only the price of the coffee changes.