A balance sheet is simply a listing of all the assets, liabilities liabilities and investments of the companies. In a traditional balance sheet, the assets are listed on the left side of the page and the liabilities are listed the liabilities on the right side of the page. There are always two
There are always two aspects to each event that allow the balance sheet to be balanced;
This is because the balance sheet is actually made up of the accounting equation.
The presentation of the balance sheet is subject to numerous problems and can lead to difficulties in the analysis. First, most assets are valued at cost; therefore, one cannot determine the market value or replacement cost of many assets and should not be assumed to have a balance sheet value equal to this current value. Second, different methods used for valuing assets are used for both short-term and long-term valuation. A third and different type of problem is that not not all items of value to the company are recorded as assets. For example, Qualities such as good employees, excellent management, and well-chosen locations do not appear on the balance sheet. Similarly liabilities related to pensions and contingencies may also appear on the balance sheet. These problems do not make balance sheet analysis impossible. They merely mean that quantitative key figure and quantitative ratio and trend analysis, qualitative judgment is required to consider the impact of these problem areas. BAS Services in Australia
In the income statement, the company’s income (whether company’s revenues and expenses (all revenues and expenses) have all been paid or not). It determines how much the profit or loss of the enterprise is for a certain period of time by deducting all expenses from the Revenue.
The problem with the profit and loss statement is that the profit at the end of the year is not actually cash. This is because parts of the income statement are based on assumptions.
Cash Flow Statement
Unlike the income statement, the cash flow statement has nothing to do with income revenues and expenses, but with the flow of cash into and out of the company. Cash flow has nothing to do with profit; they are two different types of concepts. Cash flow is mainly concerned with the cash Balance at the end of a given period, for example, each month.
It is argued that cash flow statements are more useful than the other two financial reports (balance sheet and income statement). I can understand why someone would argue this way; this is for numerous Reasons such as:
An income statement may show a positive number at the end of a period. of a given period, but this does not mean that the company has a that the company has made a profit in the form of cash, since parts of the income statement are based on assumptions. For example, the entity assumes that it has paid the insurance, even though this is not the case. However, in the income statement, it is that the company has paid for the insurance, so the profit will be different. In the cash flow statement, on the other hand, the transaction is not recorded until after the event. The conclusion is that whether or not the transaction has occurred, the income statement indicates that the transaction has occurred or will occur.
Like the income statement, the balance sheet also makes assumptions. For example, as mentioned earlier, assets are valued at cost, and it is and it may not be possible to determine the value of the assets in the future, Therefore, assumptions are made for the valuation of assets. BAS Agent Services in Australia
In contrast to the income statement and the balance sheet, the cash flow statement should contain information that provides an appropriate picture of the liquidity and liquidity and financial adaptability of the company.
The balance sheet and income statement are used to assess the financial financial position of the company, but this can be misleading as only parts of the financial activities are recorded, while the cash flow Statement of Cash Flows provides the reader with additional information that is useful.
Since both the balance sheet and the income statement use the accrual concept, it is difficult for the user of the accounts to investigate whether a company has good cash management, which is very important to the success of the company. is very important to the success of the company.
It may be that the cash flow statement represents transactions that are compared to the income statement and the balance sheet, in which transactions are assumed. It is better to use all statements together in order to give the user of the financial statements a more comprehensive picture of the company. Like the income statement and the balance sheet, the cash flow Statement has few weaknesses. For example, cash can be manipulated. As a business, you will inevitably have to juggle payments if there is a juggle with payments when there is a cash flow issue. manipulations can take place. The technical side of cash flow
Statements also need improvement. The requirements to include both cash inflows and cash outflows in one heading often results in a interspersed with brackets and is therefore difficult to understandable.
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