'Gimme some,' Marty said.
I handed him a cup and he got up and poured himself coffee and sat down and crossed his legs, making sure to adjust his pants at the knee so the crease wouldn't bag.
'Any publicly held company,' Marty said, 'is required by law to make quarterly and annual financial filings. The quarterlies are called lOQs and the annuals are lOKs.'
'Isn't that something?' I said.
'You wanna learn something or not?' Marty said.
He drank some coffee.
'Hey, this stuff isn't bad,' he said. I nodded modestly.
'The filings are public. You can go to the SEC website and look them up. What you'd be especially interested in, if you were a really amazing CPA instead of some kind of semi-legal thug, would be three documents. The balance sheet, the income statement, and the statement of cash flow.'
'I resent being called a semi-legal thug,' I said.
'Okay,' Marty said. 'Illegal thug.'
'Thank you.'
'Any good accountant can learn a lot from those documents,' Marty said. 'And the great ones, like me, know to pay close attention to the footnotes.'
'So whaddya know?'
'You know what mark to market accounting is?'
'No.'
Marty looked pleased.
'Do you know what cost, or as it is sometimes known, accrual accounting is?' he said.
'Also no.'
Marty leaned back and drank some coffee and got himself more comfortable in my chair.
'And,' I said, 'if you begin to tell me in any detail I will jam you into your attache case.'
'You wouldn't understand detail anyway,' Marty said. 'Say you kept a ledger, which in your case is unlikely, but say you did, and say you're making knuckle knives. You sell one to Hawk for a buck, and you debit your asset column one dollar, and credit your liabilities column one dollar. The two columns are always supposed to be equal.'
'I don't have a ledger,' I said.
'I know,' Marty said. 'And if you did, the columns would never be equal. But this is hypothetical.'
'And Hawk's already got a knuckle knife.'
'Shut up and listen,' Marty said. 'So you keep your ledger and somebody says how much money you got and you say a buck, and they say show me, and you take the buck out of your pocket and wave it under their nose.'
I nodded. We'd get there eventually. Pushing him wouldn't do any good. Marty was one of those guys who knew so much about a thing that he had to tell you far more about it than you ever wanted to know.
'But,' he said and paused.
'But?' I said.
I knew he was pausing for dramatic effect, I might as well help him enjoy it.
'Suppose you and Hawk have a deal. He'll buy a knife every year for five years. So you debit a buck from the asset side, and you credit five bucks on the liabilities. Because that's what the deal's worth over time.'
I nodded.
'Get it?' Marty said. 'See the problem?'
'What if Hawk dies or backs out of the deal?'
'Yes,' Marty said.
He was thrilled.
'Or somebody comes by the first year and says show me the cash?' he said.
'l take out my one dollar,' I said.
'And suppose the guy that's asking has just fixed your sink and seeing that you had five dollars in revenue, does it for credit, and now he wants his five smackers.'
'I don't think I've heard anyone say smackers since I dumped all my Perry Como albums.'
'Never mind that,' Marty said. 'What I described in grossly oversimplified terms is another kind of accounting called mark to market.'
'Thank God for the gross oversimplification,' I said.
'And here's a little embroidery,' Marty said. 'Say you think the cost of knuckle knives will go up over time, so you, or probably I, at your behest, because you pay me a monstrous retainer every year, and I am in your pocket, make a projection of how much the price will rise, and decide that they'll be worth two bucks, five years
