Financial Statements

• Balance sheet being a statement has no 'debit' or 'credit' sides that is why 'To' or 'By' words are not prefixed to the name of accounts.
• Balance sheet is prepared at the end of an accounting period - it is for a particular day, so it disclose the financial position on a particular day and not for a particular period.
• Balance sheet disclose how much business owes to others and how much others owe to business.
• The total of 'Assets' an 'Liabilities' sides are always equal.

In terms of public companies, if your cash balances are too high (effectively earning almost nothing), the shareholders will criticize management for not putting that excess cash to use, to grow the business. In the absence of investment opportunities, the shareholders will want the company to use the excess to pay dividends or to buy back stock. In the second case, assuming the market doesn't react negatively to the buy-back, each share of outstanding stock is worth more. because earnings haven't changed, but the number of outstanding shares has decreased.

Unfortunately, their is no single optimum cash balance, because the answer is dependent on so many variables, many of which may or may not apply to any particular business. For example, if you are a professional services firm, for example a law firm, you typically bill for your services after the services have been provided. Of course, the lawyers who did the work, have to get paid their salaries on a regular basis, in many cases, a long time before those billings (now accounts receivable) have been collected. So, if your outstanding receivables average 60 days, ideally, your minimum cash balance would be about two months of expenses. This is usually too high though, for several reasons. Some of your cash needs could be supplemented with a bank working capital line of credit, which fills in cash flow gaps, like the scenario I just mentioned.

Of course, your cash requirements may also be lower because you are still collecting receivables from one and two months ago.

The above is just an example. Really, the best way to approach this problem is to look at similar businesses in your industry (financial information on publicly held companies is always available through "Google Finance" and other sites). There are other services that provide information on privately-held companies, which is not available to the public, so these services can be pricey.

Start with the public companies - size doesn't matter, because you will be converting your statements and the public statements to what are referred to as "common-size" statements. You should be able to download balance sheets to an Excel spreadsheet, and choose as many periods as you can. Then convert each number in the financial statement to a percentage. Each asset is divided by total assets, and each liability is divided by total liabilities and equity. Total assets should be 100% and total liabilities and equity should total 100% Do the same with your own statements, using as many years as you can.

What you have just down is revised the balance sheets of the public companies to enable you to compare them to yours. Despite some outliers, you will most likely see a patter develop (example: companies in my industry tend to keep cash on hand equal to approximately 8% of total assets), a kind of rule of thumb that you can adopt and change as needed. Google finance can give you all the data for an entire industry segment, for which you can do the same things.

That's a great way to start. And one to build a cash projection around.

The statement of retained earnings is a business statement that illustrates the total retained earnings by a company at the end of a period.

Basically the statement starts with retained earnings from the previous period, then adds any gains (on investments) and subtracts any losses (dividends declared, goodwill, discontinued operations). You are then left with the retained earnings for the current period.

One of the characteristics of a CIS environment is that it is usually computerized. The computerization helps in the design and the various procedural aspects.

Sales revenue = 100000 * 12 = 1200000
less:
fixed cost = 300000
net income = 200000
Variable expense = 700000 (balance figure)

income statement credit column and the balance sheet debit column

The difference between assets and liablities are net assets. Per new reporting requirements it is necessary to further distinguish this value. The new reporting standards require that net assets be separated into 3 catagories. Invested in capital assets, net related debt, restricted and unrestricted. The section of invested in capital assets starts with your capital asset value less accumulated depreciation. The capital assets have to be further reduced by the debt held related to those assets. This could be bond issues or donations for capital assets. It is important to remember that other balance sheet items realted to your investment, unamortized prem or discount on the bonds and issuance costs shoud be included in the value. Accrude interest payable is exclude here because its a current liability, and thus will require current assets to retire. Any part of the debt not yet expensed to purchase capital assets should be moved to the second section, restricted for capital projects. Another element of the restricted area includes items retricted "legally" for payment. This would included accrude interest payable on the bonds outstanding. Per the standard if your debt exceeds capital assets acquire the value should be zero. Only positive amts, or zero will be shown in all sections accept for unrestricted. If the amt of restrictions on net assets exceeds net assets the value of unrestricted will be negative or deficit. Conversly, if net assets are greater than restrictions the unrestricted will be positive.

When seen on the the balance sheet the deficit indicates legal restrictions in a long term sense. It does not speak to the ability of the company to meet current obligations.

profit & loss

Actual cash flow remains the same no matter what method is used it is just the presentation of statement and method of calculated cash flows and it does not affect amount of cash flow

Since the valuation of cash flows takes the amount of time to discount or compound into consideration, the timing of the cash flows plays an important role in determining both present and future value of those cash flows in an investment.

For example, a cash flow occurring one year from now will be discounted less than a cash flow taking place five years from now.

Similarly, you would rather receive $100 today as opposed to $100 five years from now since the money received today may receive compounding interest while you wait to receive the $100 five years from now.

Due from customer is asset for business as it is due to sale of goods to customer and if customer already paid the amount then that amount would be included in balance sheet.

It's easier to use than a single step.

The date

The first is the person/ company who you are doing the balance sheet for, and the second is the title "Balance Sheet"

Electricity expense is an expense account while accrued electricity payable is a liability account

A balance sheet, also called a "statement of financial position", reveals a company's assets, liabilities and owners' equity (net worth). The balance sheet, together with the income statement and cash flow statement are used to identify/gauge a company's financial status or position. If you are a shareholder of a company, it is important that you understand how the balance sheet is structured, how to analyze it and how to read it.

Disposal of motor vehicle is not shown in income statement rather proceeds goes to balance sheet any loss or profit on disposal is shown in income statement only.

Yes change in accrued liabilities means benefits are taken already but cash not paid and if cash was paid then it reduces the cash and non payment has increased the cash for time being to be use for other purposes.

debit business expenses
credit owner capital account

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Companies can manipulate cash flows in several ways, such as delaying or accelerating the recognition of revenues or expenses, inflating or deflating sales figures, increasing or decreasing accounts receivable or accounts payable, and engaging in off-balance sheet transactions. Additionally, companies can use aggressive or conservative accounting techniques, such as changing the methods used to calculate depreciation, to manipulate cash flow numbers. However, these manipulations can be misleading and potentially misrepresent the financial health and performance of the company.

Cash is a current asset of company and shown under current assets in balance sheet of company.

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Debit Utilities expense

Credit Cash

A non-cash item accounting refers to an entry on the cash flow that correlates to the expenses. These expenses are usually essentially just accounting entries rather than the actual movements of cash.