Create Cash Flow Statement From Balance Sheet And Income Statement Accounting 101 – An Introduction to the Field

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Accounting 101 – An Introduction to the Field

Accounting is one of the most important internal aspects of any company that wants to be financially successful in today’s market. It is the process of documenting all relevant economic information about the company and communicating that information to key players. Managers and executives need accounting information to make decisions and run their business to achieve maximum profitability. Shareholders need accounting information to make informed investments.

There are many types of accounting, all of which have different roles in the business world. Probably the most famous and classic type of accountant is the CPA or Certified Public Accountant. CPA has a very diverse client list. They can serve anyone, including individuals, private companies, large public corporations, government or non-profit organizations. They can act as an independent auditor, tax advisor or financial advisor.

When performing an audit, the CPA will create an independent auditor’s report that will tell the client four key pieces of information. It first identifies the documents that were audited and describes that the purpose of this report is to express an opinion on the documents in question. Then the standards used for data analysis are explained. The third is the auditor’s actual opinion regarding the reviewed financial documents. Finally, the auditor explains his opinion on the effectiveness of the company’s financial reporting.

Another type of accountant is the CMA or Certified Management Accountant. CMA serves a smaller customer base because they usually work for one company. The main role is to advise the company on their financial management, accounting processes and budgetary matters. A CMA may work with individual employees of that company, but their main function is to advise executives on the overall financial structure of the company. They are often involved in important decisions for the company.

A subset of managerial accounting is cost accounting. The cost accountant works closely with the budget structure of the company. They are usually involved in determining the internal costs of many functions and the profitability of the company’s routine operations. Cost accountants have a very future-oriented job because they are primarily concerned with using historical data to predict the expected financial strength of a company.

The third major type of accounting is financial accounting. Financial accountants are primarily responsible for preparing financial documents for review by corporate decision makers. Managerial accountants, cost accountants, top management and shareholders use these documents to make major business decisions. Financial accountants prepare an annual report that includes balance sheets, a profit and loss account, a cash flow statement, and a statement of changes in equity (or retained earnings). These documents are usually intended for an external audience.

Financial reports are essential to the success of any profitable business. Their purpose is to formally record all financial activities of a company or an individual. These reports summarize in a standard format the financial status of the company in the short and long term. There are four main types of financial statements.

First, the balance sheet summarizes a company’s total assets, liabilities, and equity at a particular point in time. This report is also known as the statement of financial position. The balance sheet at the beginning of the year is used as a starting point. At the end of the year, the new balance will conclude the fiscal cycle. The other financial reports that will be discussed serve to fill the gap, because a lot can happen in a year.

The profit and loss account summarizes the income and expenses for the year and indicates whether the company operated at a profit or a loss. This report defines the total gross income as well as all expenses incurred along the way. The top row of the report is net sales and the bottom row is net income.

A statement of changes in equity or a statement of changes in retained earnings also analyzes data over a specific period of time. This is usually during the fiscal year. The two main components of equity are paid-in capital or cash investments and retained earnings or net earnings less dividends. If retained earnings are negative because dividends exceeded net income, this is considered a deficit.

The final major financial statement commonly used by shareholders is the statement of cash flows. The purpose of this report is to monitor the company’s cash activities during the year. This mainly refers to cash transactions related to operational, investment and other financial activities.

Shareholders use four main financial reports to make investment decisions and see what the company is doing with their money. Executives and senior management use statements to make internal budget decisions and predict future business performance. There are many components that go into a company’s financial reporting, and all of the information is critical to its continued financial health.

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