Archive for February, 2008
A cash flow statement is an accounting document which shows the amount of cash held by a company over a defined period of time. It records the various transactions the company engaged in and how they affected its cash reserves. The cash flow statement may also record the level of other assets which are deemed to be equivalent to cash. To meet this description, the assets have to be highly liquid, meaning they can be sold very easily and thus converted into cash.
Cash flow statements are used primarily to give outsiders an impression of the health of a business. For example, they would be of interest to those thinking of investing in the company, to other companies considering a merger or takeover of the company or to creditors anxious about whether or not they were going to be repaid.
Of course, at a deeper level, a company may have illiquid or intangible assets which may be of great value. For example, patents or copyrights can be immensely valuable assets and reputation or branding can be worth a great deal too even though it is difficult to quantify their worth. A cash flow statement would not include assets such as these and so cannot be considered a comprehensive view of a company’s value.
What is Accounting?
What is cash flow?
Posted on 28 February '08 by admin, under Accounting. No Comments.
Book-keeping is the practice of maintaining a careful record of all of a person or organisation’s income and expenditures. In modern times, book-keeping is often regarded as essential so that a person or organisation can discharge tax obligations to the government fully and properly. Book-keeping is less complex than accounting but proper book-keeping is an essential preparatory stage in the completion of proper accounts. Within corporations, trained personnel are usually employed to carry out book-keeping duties, although these people are not usually fully trained accountants as the task does not require that level of expertise.
A variety of book-keeping systems exist. The simplest is called single-entry book-keeping. It involves recording each disbursement of money the company or person makes to an external entity and any payment made by an external entity to the person or company.
Double-entry book-keeping is a more complex system which was first developed in late medieval Italy. It involves each transaction being recorded in two separate columns. Such book-keeping systems involve maintaining columns for separate aspects of the company’s financial life, such as Bank, or Supplies. Double-entry book-keeping is regarded as more accurate for the purpose of keeping records of complex financial entities and it forms the basis of modern corporate book-keeping practice.
What is Accounting?
What is Book Keeping?
Posted on 28 February '08 by admin, under Accounting. No Comments.
A balance sheet is a financial statement which describes a company’s overall financial position at a moment in time. It is considered one of the most important forms of financial statement and, in many countries, there is a legal requirement that companies submit a balance sheet to the government on a periodic basis (usually yearly), along with other accounting information. Failing to submit a balance sheet on time can result in civil or criminal liability for the company’s officers. Usually, balance sheets so submitted will be available for public inspection.
A balance sheet lists all the liabilities and assets of the company. When all of these are summed together, the end result should be zero; hence the name. Assets include cash the company has available, property, inventories of goods, equipment used for the operation of the business, amounts the company is owed by other companies, individuals or the government, as well as less tangible things such as copyrights, trademarks, goodwill and reputation. Liabilities include debts the company owes to other companies, to investors, consumers or the government.
A balance sheet is useful for giving a quick overview of a company’s financial position and, as such, is used by investors, civil servants, and stock market analysts, among others.
Excess of loans, whether it is personal loans or car loans, as long as they are unsecured loans, they will not be contributing towards debt remission.
Posted on 28 February '08 by admin, under Accounting. No Comments.
A financial audit is an external check on a company’s accounting procedures which verifies that financial statement have been compiled usually a generally accepted methodology and are substantially free from error. Usually it will be performed by a specialised accounting firm. In many countries company are required by law to submit accounts and financial statements to the government on an annual basis. There is often also a requirement that those accounts be externally audited.
There is clearly a certain tension between the duty of an external auditing firm to verify the integrity of the accounting process and its desire to go on gaining business from the client company. If an auditing firm consistently and strenuously raised objections to a client’s accounting methods, perhaps its services would no longer be retained. By contrast, if an auditing firm is too easy-going in its approach to account scrutiny, the integrity of the client’s accounts will not truly be guaranteed. In the event of a financial implosion at the company, the reputation of the accounting firm may itself be called into question and it may lose business from other companies for that reason.
Exactly this process occurred following the collapse of the energy company Enron in the United States. The accounting firm Arthur Andersen had been responsible for auditing Enron’s accounts and, following Enron’s bankruptcy, Arthur Andersen suffered a calamitous loss of reputation and business, leading to the disintegration of the company.
What is Accounting?
What is an Audit?
Posted on 28 February '08 by admin, under Accounting. No Comments.
In accounting terms, an asset is an economic resource controlled by a company which is expected to produce benefits to the company in future. Assets are categorized as either current assets or long-term assets. Current assets are assets whose value can be realized in a short space of time and readily converted into cash (if they are not cash already). Examples of short-term assets include debts which are due to be paid by others, inventories of goods which the company has produced for sale or bought for use as inputs in its own business processes, cash or readily saleable financial securities. Long-term assets are assets which are fairly illiquid. Examples would include things such as property or factory or office equipment. Land which is owned by a company, or rights to exploit any mineral wealth within a particular area, would also be considered long-term assets.
Some assets are intangible in nature. These would include things such as intellectual property rights, good reputation and goodwill. It can be difficult to quantify the value of intangible assets. There is also a certain amount of variation between countries in how intangible assets are treated in the preparation of a company’s set of accounts.
What is Accounting
What is an Asset?
Posted on 28 February '08 by admin, under Accounting. 1 Comment.