managing-budgets

Again this is done for a specific period of time to

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Unformatted text preview: ed or spent. You would include payments or received funds in the form of cash, check credit card payments, debit card payments, electronic transfers, or any other means of payment. For tracking cash-flow, this is the easier of the two accounting systems. Accrual-based accounting With accrual-based accounting, you record all transactions when they occur, even if no cash has changed hands. For example, if you were to sell something to a customer on store credit, you would give the customer the product immediately, but you wouldn’t receive payment for the item until they make it at a later date. This system is not good for tracking actual cash flow. For example, you could make thousands of dollars of sales so that you have a great deal of money showing as revenue on your Income Statement, but you could have zero dollars in the bank! If your organization uses accrual-based accounting, creating the Cash Flow Statement is more complicated. It will require that you look at your Net Income and determine what portion of it was actually cash. Then you will have to add and sub out the changes in accounts that do not have an impact on cash, such as depreciation. Depreciation Considered a non-cash expense, depreciation is the reduction in value of an asset that occurs over time. Depreciation could be due from use, wearh and taear, age, or irrelevance. For example, the computer you buy today will not be worth what you paid for it in five years. Instead, it will gradually depreciate until it either reaches the end of its life or it becomes completely useless for the operation of the business. Depreciation has to be included in financial statements as a cost in order to represent the true value of the organization’s assets. Download free ebooks at bookboon.com 36 Cash Flow Statement Managing Budgets 6.2 Cash Flow Categories The Cash Flow Statement typically analyzes cash flow in three different categories: Operations Financing Investing Figure 6 demonstrates the main sources of incoming cash and the common us...
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This note was uploaded on 06/07/2013 for the course BA 201 taught by Professor Cuongvu during the Fall '13 term at RMIT Vietnam.

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