Archive | Financial Statement

Maintaining Cash Flow Statement

The following points highlight the top two methods for maintaining cash flow statement. The methods are: 1. Direct Method 2. Indirect Method. Cash Flow Statement: Method # 1. Direct Method: Under the direct method, cash receipts from operating revenues and cash payments for operating expenses are calculated and shown in the cash flow statement in […]

Funds Flow Statement: Meaning, Rules and Advantages

In this article we will discuss about the Funds Flow Statement:- 1. Meaning of Funds Flow Statement 2. Rules for Drawing up the Funds Flow Statement 3. Advantages 4. Limitations. Meaning of Funds Flow Statement: Accounting Standard (Revised)-3 has made Funds Flow Statement obsolete. Hence, the following description is meant only for those who may, […]

Cash Flow Statement: Definition, Classification and Advantages

In this article we will discuss about the Cash Flow Statement:- 1. Introduction to Cash Flow Statement 2. Definition of Cash Flow Statement 3. Classification of Activities 4. Advantages 5. Limitations. Contents: Introduction to Cash Flow Statement Definition of Cash Flow Statement Classification of Activities in Cash Flow Statement Advantages of Cash Flow Statement Limitations […]

Financial Statements of a Business Enterprise

The financial statements are: 1. Profits and Loss Account 2. Balance Sheet 3. Statement of Changes in Financial Position (SCFP). Financial Statement # 1. Profits and Loss Account: Profit and loss account, also known as income Statement, presents the results of operations of a business enterprise for a period of time. This statement shows net […]

5 Main Areas where Income Information is Used

The following points highlight the five main areas where income information is used. The areas are: 1. Income as a Guide to Dividend and Retention Policy 2. Income as a Measure of Managerial Efficiency 3. Income as a Guide to Future Predictions 4. Income as a Means of Determining Tax 5. Income as a Guide […]

Procedure of Computing Accounting Income: 4 Steps

The following points highlight the four main steps involved in procedure of computing accounting income. The steps are: 1. Defining the Particular Accounting Period 2. Identifying Revenues of the Accounting Period Selected 3. Identifying Costs Corresponding to Revenues Earned 4. Matching Principle. Step # 1. Defining the Particular Accounting Period: Accounting income refers to the […]

Comprehensive Income: Concept, Components and Advantages

In this article we will discuss about Comprehensive Income:- 1. Concept of Comprehensive Income 2. Components of Comprehensive Income 3. Advantages. Concept of Comprehensive Income: Comprehensive income, also known as all-inclusive concept of income, is the change in equity (net assets) of an entity during a period from transactions and other events and circumstances from […]

7 Important Criterion for Revenue Recognition

The following points highlight the seven important criterion for revenue recognition. Some of the criterion are: 1. Revenue Recognised at the Point of Sale 2. Revenue Recognition in Sale of Services 3. Revenue Recognition in Construction Work 4. Revenue Recognition in Instalment Credit Sales 5. Revenue Recognition Using Production Method and Others. Criteria # 1. […]

Top 3 Concepts of Income (With Measurement)

The following points highlight the top three concepts of income. The concepts are: 1. Accounting Income 2. Economic Income 3. Capital Maintenance Income. Concept # 1. Accounting Income: Accounting income, often referred to as business income or conventional income is measured in accordance with generally accepted accounting principles. The profit and loss account or income […]

Measurement of Revenue: 4 Adjustments

The following points highlight the four main adjustments to be made to determine revenue. The adjustments are: 1. Discounts 2. Sales Returns and Allowances 3. Bad Debts 4. Revenue Measurement in Non-Cash Transactions. Adjustment # 1. Discounts: Discounts may be generally of two types—trade discount and cash discount. Trade discounts are used in determining the […]

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