How Accounting Is Regarded As The Language Of Business

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Accounting is regarded as the language of business to most of us . Who are the main users of this old ancient financial language and what do they look for and why do they look for these things? People interested in this language are normally looking for information where its creditors, bankers, financial analyst or even your good old fashion accountants. Preparing an income statement is not easy task I can become an integral part of communicating through numbers and explaining the financial transactions of a pacific organization “Those versed in accounting knows that both the balance sheet and income statement are needed in order reasonably to appraise the financial condition of an enterprise at any given moment (Tilly, 1948). The main…show more content…
The income statement is a financial statement that is used to help determine the past financial performance of the enterprise, predict future performance, and assess the capability of generating future cash flows. It is also known as the profit and loss statement (P&L), statement of operations, or statement of earnings. Methods for Constructing the Income Statement The income statement can be prepared in one of two methods: single or multi-step. The Single Step income statement totals revenues, and then subtracts all expenses to find the bottom line. The more complex Multi-Step income statement (as the name implies) takes several steps to find the bottom line. First, operating expenses are subtracted from gross profit. This yields income from operations. Then other revenues are added and other expenses are subtracted. This yields income before taxes. The final step is to deduct taxes, which finally produces the net income for the period measured. Operating Revenues and Expenses The operating section includes revenue and expenses. Revenue consists of cash inflows or other enhancements of the assets of an entity. It is often referred to as gross revenue or sales revenue. Expenses consist of cash outflows or other using-up of assets or incurrence of liabilities. Elements of expenses include Cost of Goods Sold
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