(Tudor and Mutiu, 2006, p.2). Another benefit of using cash flow is that this method can also be viewed as a method of measuring firm’s performance in some extent. According to Marshall (2014), there are there categories under cash flow basic: cash flows from operations, cash flow from investing and financing activities. These there approaches will explain users the overall change of cash during the year. If the cash from operations exceeds cash flows from investment, that reflect a good sign of firm’s performance.
• Income statement The income statement reports the profit of the company during a given accounting period. Companies can determine both the gross profit and net profit from this information. Gross profit is the amount of money from the sale going to the cost of goods sold. Net income indicates what portion of sales
After preparing the adjusted trial balance, the accounting cycle will continue with preparing the financial statements. Preparing the financial statements is the most important steps in the accounting cycle. Balance sheet, income statement, statement of changes in equity and statement of cash flows will be prepared in order to provide useful financial information to the external users. The income statement or known as profit and loss statement is a report that display the income and expenses of the company during the accounting period. The income statement also served to calculate the net income or loss of a company by deducting the total expenses from the total income and this calculation shows investors and creditors the overall profitability of the company as well as how efficiently the company is at generating profits from total
The business performance is evaluated by measuring the profit or loss incurred by the business. Profit is calculated by subtracting the total expenses from the total revenue made by the business. Revenue is the amount of finance generated by the business from its’ normal activities. On the other hand, expenses are costs that the business incurs in its’ operations of gaining revenue. The income statement is connected to the balance sheet in that the net profit calculated at the end of the statement is used in the preparation of the statement of financial
It consists of all the income which causes changes in the stock holder’s equity e.g.-unrealized gains or losses, retirement investments or pension schemes, foreign currency adjustments etc. This statement helps in the future planning of the organization. Statement of Cash flows is a statement that provides information regarding the cash inflows and outflows of a business. Cash generated is categorized under three headings in the Statement of Cash flows namely Operating Cash Flows, Investing Cash Flows and Financing Cash Flows. It identifies the liquidity position of an entity and helps managers take relevant measures
Under time period assumption, we prepare financial statements quarterly, half-yearly or annually. Theincome statement provides us an insight into the performance of the company for a period of time. Thebalance sheet (also known as the statement of financial position) provides us a snapshot of the business ' financial position (assets, liabilities and equity) at the end of the time period. The statement of cash flows and the statement of changes in equityprovide detail of how the company 's financial position changed during the time period. One implication of the time period assumption is that we have to make estimates and judgments at the end of the time period to correctly decide which events need to be reported in the current time period and which ones in the
They came to realise that the usefulness of accounting numbers can be categorized as either timeliness or content. To conduct their research they compared the firm specific changes in stock prices with the unexpected change in the accounting income numbers. The time span for these changes
When someone is looking at any income statement it’s essential to take a look to the footnotes because in there you can see how the accountants arrived to the totals. One big rule in the income statement is that many numbers reflect estimates and assumptions. Most of the time accountants have decided to include some transactions here and not there. They have to estimate most of the times. First of all, it’s essential to know how to manage the recognition of revenues.
 5.1 Income & Expenditure: An income & expenditure account is similar to an income statement. It records the flow of cash in the business and at the end of the financial year, it will indicate whether there is a surplus of income over expenditure (or
• Net cash used for investing activities show negative value. While it was -1293 in 2011, this result was increased by 381 in 2012. This result is still lower compared to the year of 2010, where the net cash used for investing activities was