Accounting Research: Advantages of Cash Flow

A number of people who have studied this topic have suggested that Sarbanes-Oxley is a beneficial law that can improve financial reporting. Paul Volcker and Arthur Levitt Jr. of the Wall Street Journal and Stephen Wagner and Lee Dittmar of the Harvard Business Review are just a few of them who’s articles helped shape this paper. Julia Hanna’s article on Forbes was also used in writing this paper. Obviously, the Sarbanes-Oxley Act of 2002 was also used in this paper, as well as, the AICPA Audit Committee Toolkit. Peter Yeoh’s article in the International Journal of Disclosure and Governance was also helpful.

Preparing different income statements captures information in diverse ways to facilitate decision making on internal matters. The management needs to understand cost behavior in order to control the costs. Besides the production costs, changing sales patterns affects profitability and there is a need to achieve better sales accuracy after understanding cost behavior. Variable costing also captures information about the impact of changing operation on profitability and the management is better placed to make pricing decisions to maximize

They need to research about the company’s financial heath, just because it looks perfect from the outside, does not mean the company is running perfectly fine. The statement of cash flows will tell us a better and more complete story of what’s really going on in the company financially. For the management is very important to keep track of how cash is utilized and managed. The statement of cash flows will assist investors and shareholders to predict future cash flows, evaluate management decision, and determine ability to pay dividends and interest and determine the relationship of net income and cash

The United States has become increasingly concerned with the quality of earnings reported from companies. Although the quality of earnings should be able to be used as a predictor to the future of the company, management policies have been able to find a way that makes the company seem as if incoming income is steady, even if it is not. Ways like over and understating stating expenses can make a company seem better than they are. While the use of non-GAAP earnings can have benefits, many individuals are worried that using non-GAAP earning will lead to giving out false financial reports. No matter the accounting method used, all managers must act ethically on behalf of the law, and the company.

Financial reporting practices are necessary in any successful business. They are used to keep track of a business finances, and to make sure the business is following legal and ethical standards. There are four elements to financial management; they are planning, controlling, organizing/directing, and decision making. Each of these plays a vital role in correctly reporting finances. Furthermore, there are principles in accounting for healthcare that help reiterate the reporting practices.

A financial statement is a document in which the current situation of the user at the end of the fiscal year is known. The financial statements are important because they are serious and official recognition that allow a much organised idea finance documents. They help not only to see the past, but to learn from it to improve the following year. They also allow study of clear and effective way he was saved was spent and more. The financial statements reflect the financial position of the company, financial performance and cash flows of the company, it is significant to note that the correct depiction of the impacts of transactions and other events and circumstances according to the explanations and a criteria identification of assets, liabilities, income and expenses goes in the same outline (Schroeder et al., 2011).

Accountants, business owners, investors, creditors and employees use four basic financial statements of an organization to determine the financial well-being and future earnings potential of that organization. Financial statements are a key tool in seeing and understanding the past, present and future condition of an organization. What are these financial statements and what do they mean to the reader? Do the financial statements mean something completely different to an investor, creditor, and employee?

Describe the two different methods of preparing a cash flow statement. What is the primary difference between the two methods?

Financial reporting is extremely important in our everyday life. You have heard of the many

of cash flows. Since the income statement is based on the accrual method, net income

Therefore, the adaptation of having a statement of cash flows becomes essential to any business or organization. With the adaption of such a system personnel such as stakeholders become essential. Stakeholders are a key role personnel when it comes to motivating the employees, acquiring resources to assist on the final decision or final project, provide a valuable input, and ultimately build trust with to increase consensus at the final decision making. The

Managers are who manage the business on a daily basis. They need to know how well projects are progressing financially and about the financial position of the business. E.g. how much assets and liabilities are they own. Can the businesses able to increase capacity in the next few months? This is referred as management accounting. For instant, managers can use contribution margins to set the product selling price in order to maximise the profit. Managers can use payback period and average return rate to assess the risky of the project. Furthermore, Argilés & Slof (2003) found that making decision by using financial report will have better performance. They had set up a research about the comparison of the farms

Financial crises like dot-com bubble in the late 1990s and the housing market crash in the late 2000s prompted investors, and firms, to reconsider the criticality of financial discipline. Transparency would be necessary to entice investors to spend money again, thus a firm’s financial statements became their marketing tools. These examples reinforce the importance of financial statements’ relation to the financial wellbeing of a company. This paper serves as a report on the purpose and aspects of the various financial statements and their applicability to the performance of a firm.

An important function of the accounting field is to provide external users of financial statements with assurance that the financial information being presented is both reliable and accurate. This basic function of accounting is so important that there is an entire field of experts, called auditors, dedicated to assuring its proper performance. Throughout history there have been many instances in which the basic equilibrium between an institution and current/potential investor has been threatened due to a lack of accountability and trust between the two parties. This issue has been the catalyst for many discussions regarding the proper procedures a firm should follow in order to provide

Financial Statements basically show the historical performance or record of the company at some previous point of time. By the time when financial statements are made public, changes are many economical areas such as market conditions, currency exchange rate and inflations can change the values of assets and liabilities. In this case there often exist discrepancies between book value of assets and their market values.