The statement of cash flows is one of three very important financial reports that managers and investors look at when analyzing a company’s past or present financial status. The balance sheet and the income statement are the other two reports. All of these reports are very important in running a successful business, but the statement of cash flows is the most important. It is like the blood of a company since it would not survive successfully without it. Cash on hand can actually be much more important than income, profits, assets, and liabilities put together, especially in the early stages of any company. The statement of cash flows tells us how much cash we have on hand after all costs are met. It shows how much cash we started with and how much we pay out. There are two parts to the statement of cash flows which are the top Continue reading
Financial Accounting Concepts
Financial Accounting – Definition, Nature, Scope and Limitations
MEANING OF ACCOUNTING Accounting is the process of recording, classifying, summarizing, analyzing and interpreting the financial transactions of the business for the benefit of management and those parties who are interested in business such as shareholders, creditors, bankers, customers, employees and government. Thus, it is concerned with financial reporting and decision making aspects of the business. The American Institute of Certified Public Accountants Committee on Terminology proposed in 1941 that accounting may be defined as, “The art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character and interpreting the results thereof”. DEFINITION OF FINANCIAL ACCOUNTING The term ‘Accounting’ unless otherwise specifically stated always refers to ‘Financial Accounting’. Financial Accounting is commonly carries on in the general offices of a business. It is concerned with revenues, expenses, assets and liabilities of a business Continue reading
Financial Manager – Roles and Responsibilities
Ever since the 1900s and even after the Great Depression in the 1930s, the primary role of a finance people was only a descriptive discipline on bookkeeping which means accurately recording all transactions related to the payment of suppliers, billing of customers, and handling of cash passing through the accounts department and issuing periodic financial statements. Until the late 1960s increased competition in industries forced financial managers to shift their focus towards evaluating investment opportunities and making decisions on the choice of assets and liabilities necessary to maximize the company’s value. The 1970s and 80s were a period of increased international competition, CEOs became concerned with operational efficiency to cope with the fast-growing market, this included the accounting functions which were streamlined and required to reach out to become a profit center for the whole organization. This transitional shift was gradual and finance manager’s roles are no longer stuck solely Continue reading