Financial Statements

How Does the Current Portion of Long-term Debt Affect Cash Flow Statement?

Companies obtain finance from various sources. Usually, this finance comes from equity holders, which constitutes equity finance. This finance is perpetual and can be crucial in helping companies start their operations as startups. However, as companies progress, they have more options available in meeting their financing needs. The other finance source that companies can choose …

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How to Treat Capital Reserve in Cash Flow Statement?

Using and understanding financial statements are crucial for investors. These statements provide insights into a company’s operations and activities. Usually, companies report these operations through four financial statements. These include the balance sheet, income statement, cash flow statement and statement of changes in equity. Each of these plays a significant role in helping investors analyze …

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Does Prepaid Rent Go On Cash Flow Statement?

Companies incur expenses to help in generating revenues. These revenues can allow companies to make profits. If companies don’t spend, they cannot make sales. Therefore, expenses are crucial in helping companies operate and continue their activities. Some may view these spendings as unnecessary. However, they support the revenues that companies generate through their operations. Companies …

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What is the Treatment of Provision in Cash Flow Statement?

Managing cash and cash equivalent resources is crucial for companies to stay liquid. This liquidity also brings many benefits, such as quicker transactions, more flexibility, better opportunities, etc. Similarly, most investors prefer investments that can illustrate better cash management. These investors obtain information about how companies manage their operations through financial statements. For most companies, …

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How Will You Treat Payment of Interest on Debentures in Cash Flow Statement?

Companies prepare financial statements to report their activities to the stakeholders. These include four reports. Out of these, three use the accrual concept in accounting to present activities. While it is a mandatory accounting concept, it can also be confusing. Furthermore, they do not show how a company uses its cash resources or report cash …

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Where Do Security Deposits Go on a Cash Flow Statement?

The cash flow statement is one of the primary financial statements prepared by companies for financial reporting. This statement covers the cash movements in cash and cash equivalent balances during a period. In accounting, the cash flow statement allows companies to report cash activity. The other financial statements use the accrual concept, which can be …

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How Do Proceeds on Sale of Fixed Assets Affect Cash Flow Statement

Cash inflows and outflows are a crucial part of any company. These flows may relate to financial or business transactions. When these transactions occur, companies can record the cash flows in their accounts. These cash transactions then become a part of the cash flow statement. In accounting, cash flows are not necessary to record a …

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How Do Acquisitions and Disposals of Business Affect the Cash Flow Statement?

Companies are separate legal entities that can exist on their own. These entities are similar to other businesses since they operate similarly. However, they differ from other structures due to the separate legal entity feature. Through this, companies can transact without their owners’ involvement. Nevertheless, they may also face issues with being independent of their …

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Why Income Statement is Important? 5 Points You Should Know

Investors invest in companies expecting returns and income. Usually, companies pay dividends which can constitute earnings for investors. On top of that, some companies may also provide capital gains through increasing share prices. However, investors must first investigate the company to ensure it can offer those returns. The primary source they can use is the …

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