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Useful and summary explanation of the Cash Flow statement the important basic financial statements that show the cash side of the company.

#Double-Entry Double-entry bookkeeping is a fundamental accounting system where every transaction is recorded in at least two accounts: one as a debit and the other as a credit, ensuring that the accounting equation remains balanced: Assets = Liabilities + Equity #Key #Principles# of Double-Entry: #1. Every transaction has two effects: A value received (debit) A value given (credit) #2. Debits and Credits: Debits increase assets and expenses, and decrease liabilities and equity. Credits increase liabilities, equity, and revenue, and decrease assets. #Example: If a business purchases equipment worth $5,000 using cash: #Debit: Equipment account (an asset increases) – $5,000 #Credit: Cash account (an asset decreases) – $5,000 #Benefits: Ensures accuracy through balancing entries. Provides a complete financial view. Makes error detection easier.

Today, let's explore the key distinctions between accrual and cash accounting methods. Cash accounting, similar to personal finance tracking, records transactions only when cash physically exchanges hands. On the other hand, accrual accounting recognizes transactions when they occur, regardless of cash flow timing. This method aligns revenue and expenses with the periods in which they contribute to operations, offering a more comprehensive view of financial health. While cash accounting simplifies record-keeping, accrual accounting provides a more accurate portrayal of a company's financial position over time. Small businesses often prefer cash accounting for its simplicity, while larger enterprises lean towards accrual accounting to offer stakeholders a detailed financial picture. Understanding these accounting principles is vital for interpreting financial statements and making informed decisions. Each method has its merits, chosen based on the specific needs and goals of the business. If you're not sure what method you're using or should be using, let's go over it together! #smallbusinessbookkeeping #pathwaytoprosperity #accountingmethods #cashvsaccrual #financialliteracy #Accounting101

Blog on Navigating the Source-to-Pay Finance Process Taxonomy: A Comprehensive Guide! https://lnkd.in/dVPihjbn #Finance #Financetaxonomy

Cash Flow!!! This is a statement which shows the movement of the Company’s cash. Mainly from three activities, Namely: -Operating activities -Investment activities -Finance Activities Cash flow is among the important elements of financial statements. Considering the fact that the statement reflects actual inflow and outflow of Cash and cash equivalents within the company, It acts as a foundation of a good financial analysis. How???! Cash flow statements is made up of the actual cash movement, Considering that other components financial statements I.e Statement of profit or loss (Income Statement), Statement of Financial Position, Statement of Change in Equity and Notes to financial statements contains items of cash and non cash nature , An analyst may arrive at a general conclusion about the Company’s performance, However the fact that Cash flow statement incorporate only actual cash movement, An analyst will be able to arrive at the best conclusion. Why???! Cash flows shows what the company generates and spend towards it's operations, investment and financing activities. This statement reflects the Company’s ability to manage its funds to add value to the shareholder. Take a loot into a scenario where we observe that the Company’s is highly dominated with cash from operational activities, This communicates that, That particular company has a high investment in working capital than fixed capital implying that value for the company is generated within a short period only. Hint!!! This is to all accountants, financial analysts, auditors and all other interest parties in accounting profession, We should consider the importance of cash flow when we want to make decisions for value creation to shareholders. All the best!!!!!!

A crucial skill: How to Prepare a Cash Flow Statement  https://lnkd.in/eQz-Ge9c

Managing two accounting worlds - cash and accrual is no small feat. Your financial statements feel like a mismatched puzzle. Revenue recognition doesn’t line up with cash receipts. Expenses don’t align with payments. The result? Your business decisions are clouded by unclear financials. But you can fix this. Here’s how: Use cash accounting when: - Your business is small (under $5M revenue) - Simplicity in cash tracking is key - Immediate tax planning is a priority Choose accrual accounting for: - Larger operations - Complex revenue streams - Accurate financial positioning Combine both by: 1. Keeping separate cash flow records 2. Using accrual for financial statements 3. Reconciling both monthly 4. Creating reports for both needs This approach brings clarity, showing your immediate cash position and long-term health. Make decisions confidently, knowing your numbers reflect reality. #cashaccounting  #accrualaccounting  #finance

Cash v Accrual Accounting Managing two accounting worlds - cash and accrual is no small feat. Your financial statements feel like a mismatched puzzle. Revenue recognition doesn’t line up with cash receipts. Expenses don’t align with payments. The result? Your business decisions are clouded by unclear financials. But you can fix this. Here’s how: Use cash accounting when: - Your business is small (under $5M revenue) - Simplicity in cash tracking is key - Immediate tax planning is a priority Choose accrual accounting for: - Larger operations - Complex revenue streams - Accurate financial positioning Combine both by: 1. Keeping separate cash flow records 2. Using accrual for financial statements 3. Reconciling both monthly 4. Creating reports for both needs This approach brings clarity, showing your immediate cash position and long-term health. Make decisions confidently, knowing your numbers reflect reality. #cashaccounting  #accrualaccounting  #finance

The "#closing stack" refers to the process of closing temporary accounts, such as revenues, expenses, gains, and losses, to retained earnings at the end of an accounting period. This is done through journal entries called "closing entries". The closing stack includes: 1. #Revenue accounts_: Closing entries transfer revenue balances to retained earnings. 2. #Expense accounts_: Closing entries transfer expense balances to retained earnings. 3. #Gain accounts_: Closing entries transfer gain balances to retained earnings. 4. #Loss accounts_: Closing entries transfer loss balances to retained earnings. The purpose of the closing stack is to: - Close temporary accounts to zero - Transfer their balances to retained earnings - Prepare the accounts for the next accounting period.

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