Business Accounting Essay

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Introduction
Financial statements What carries out the accounting and financial forecasting of any type of company is financial statement. As for financial statement, it is a financial report or record compiled usually on a quarterly and annual basis which quantitatively provides the indication of an individual’s, an organization’s, or business’s financial status. There are, according to belief of most experts, generally three financial statements such as: an income statement (Pro Forma Profit and Loss), a balance sheet and a cash flow statement. Although these three financial statements differ by different functions each of them performs, they closely depend on one another. For instance, an income statement hinges upon a balance
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It always puts Assets on the left side or on the top, with capital and liabilities on the right side or the bottom. Balance sheet must always comply with the formula below: Assets = Liabilities + Capital

Income statement Income statement is also called Profit and Loss. While it has some influence on Assets, Liabilities, and Capital, it only includes Sales, Costs, Expenses, and Profit. Income statement shows the information on the flow of transactions over some specified period of time like a month, a quarter, a year, or even several years. In other words, income statement provides information regarding the revenue earned by the company within a specified period of time. To be more forward, income statement demonstrates inflows and outflows of assets, where inflows are revenues and outflows are expenses. An excess of inflows over outflows is net income, whereas an excess of outflows over inflows is named as net loss. 3
Sales – Cost of Sales (or COGS, Cost of Goods Sold, or Direct Costs) = Gross Margin
Gross margin – Expenses = Profits 3

2 http://www.wisegeek.com/what-are-financial-statements.htm
3 http://planasyougo.com/the-three-main-statements
4http://www.fool.com/investing/beginning/how-to-value-stocks-how-to-read-a-balance-sheet.aspx

Cash Flow What is
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