ACCOUNTING 101

All about the Paper

Some accountants consider a cash flow statement the most important component of a financial statement. A cash flow statement will differ from an income statement by reporting what funds are actually available. For instance, an income statement will not account for revenues that will never be collected, or expenses that have no effect on cash flow such as depreciation. It will help explain any changes in cash or cash equivalents during the beginning or ending of an accounting period.

Balance, Balance, Balance

Put simply, the balance sheet reports the company’s assets, liabilities, and stockholder’s equity. The balance sheet must be read in tangent with the income statement and cash flow statement. The asset component of the balance sheet reports the company’s resources such as cash; the liability component of the balance sheet indicates the companies obligations owed to customers; the Stockholder’s equity is calculated by subtracting liabilities from assets.

Incoming Statements

Income statements deal primarily with revenues and expenses, gains and losses. It is one of the two general ledger accounts required for every company. A large corporation may have thousands of income statements: advertising expense, digital advertising expense, rent expense, and ect. By the end of the accounting year, the balance of the income statements are calculated and then transferred to Retained Earning for a corporation, or owner’s capital for a small business.

Reach out the Pros

When it comes to finances, however, the do it yourself attitude is not usually ideal. You want a qualified professional handling your most treasured treasure in order to maximize profit, and increase the probability of success for your company. If you interested in consultation reach out to us today at Li, Friezen & Grossetta, CPAs, PC