In business as in sports there are Winners and losers although some Businesses make a lot of money and Thrive others lose tons of money and die So how do you keep track of how your Business is doing so you can react and Take appropriate measures you use an Accounting system An accounting system in simple terms Tracks how much money comes into a Company and how much goes out preferably Your company has more coming in than Going out It has many responsibilities when Tracking your money It monitors how much cash you have in Your bank account it shows how much Money you owe to other companies and Individuals and how much money others Owe you it tracks the value of the Products you keep on hand to sell to Customers it tracks the money that you Pay to employees in the form of salary And benefits it reports the money that's Left over at the end of each month your Company's profit unfortunately it Sometimes indicates how much money your Business has lost in a particular period Of time For the most part winning and losing in The world of business is determined on The basis of financial measures the most Important Financial measures are sales Revenue and profit

Sales represents the total amount of Money that flows into a company as a Result of selling goods and services Profit presents the money that's left Over after a company subtracts its Expenses payroll benefits cost of goods Sold rent telephones and so on from its Revenues however before we get too far Ahead of ourselves this section Discusses the basics of accounting Including the accounting cycle and the All-important accounting equation Remember a small business May process Relatively few transactions a day making Its accounting system relatively simple An accounting system for a very large Business one that does millions of Dollars of business a day is quite Complex in either case accounting Systems along with the computers that Run them and the people who run the Computers are always important The accounting cycle The entire accounting process from Beginning to end is called the Accounting cycle the accounting cycle Has three parts transaction a Transaction is something your business Does that generates a financial impact Which is then recorded in the accounting System a journal for example if a member Of your sales staff sells a three-year Subscription of your magazine to an Anxious customer and then the check for

A hundred and ten dollars arrives and is Deposited into your company's bank Account that's a transaction Similarly when your company makes a Payment to Joe's house of cheese for Supplying food for your company's annual Picnic that creates a transaction Journal As each transaction occurs it gets Posted to a journal a journal is nothing More than a general file to temporarily Hold transactions until you can classify Them by transaction type Ledger On a regular basis daily weekly monthly Or other frequency you classify Transactions in the journal by type and Move them into individual accounts Called ledgers individual ledgers Include such accounts as payroll travel And sales The collection of all ledgers for a Company is called its general ledger After all transactions have been posted To their ledgers managers have access to A wide variety of reports that summarize The organization's transactions and Their effect on the business which Include the income statement balance Sheet and so on The accounting equation The accounting equation is the Foundation of the science of accounting A day without the accounting equation is

Like a day without Sunshine at least it Is in our certified public accountants CPA's office according to the accounting Equation assets equal liabilities plus Owner's equity The following sections break down each Part of the accounting equation and how It affects your organization's finances Assets an asset generally is anything in A business that has some sort of Financial value and can be converted to Cash the products you have stocked in Your Warehouse are assets they're Converted into cash as you sell them Along with the cash in your register Which could also be converted into cash If you sold it on eBay and the microwave Oven in the employee break room Remember assets come in two different Flavors these categories represent how Quickly assets can be converted into Cash Current assets are assets that can be Converted into cash within one year Think checks that arrive in the mail Today invoices for a month's worth of Consulting services or the computers for Sale on your showroom floor assets that You can quickly convert into Cash also Are known as liquid assets and the speed By which you can convert assets Into Cash is called liquidity Fixed assets Are assets that take more than a year to

Be converted into Cash Think that custom-built industrial Milling machine that only three Companies in the world have any use for The building that houses your Headquarters and that finicky old copier Down the hall that may now make a better Boat anchor than reproduction machine Here's a list of the most common kinds Of business assets Cash Cash includes good old-fashioned money And money equivalents such as checks Money orders marketable Securities Bank Deposits Accounts receivable Accounts receivable represent the money That your clients and customers owe you For purchasing your products or Services When you allow a customer to buy your Goods today and pay later you are Creating a receivable if you work Strictly on a cash basis hot dog stand Ticket scalper e-commerce site you don't Have any receivables and this item will Be zero Inventory Inventory comprises the finished Products that you purchase or Manufacture to sell to customers as well As raw materials work in progress and Supplies used in operations If you run a grocery store your Inventory consists of every item on

Display for sale in your store the Carrots the tubs of margarine the boxes Of donuts and so on Prepaid expenses When you pay for a product or service in Advance you create an asset known as a Prepaid expense examples include a Prepaid maintenance contract on a Typewriter an insurance policy with a One-year term paid in advance and an Agreement for security Alarm Monitoring Paid in advance on a quarterly basis Equipment Equipment is the wide variety of Property that your organization Purchases to carry out its operations Examples include desks chairs computers Electronic testing gear forklifts and Lie detectors Real estate Real estate includes assets such as the Land buildings and Facilities that your Company owns occupies and utilizes some Companies have little or no real estate Assets and others have sizable ones Liabilities Liabilities are money owed to others Outside your organization they may Include the money you owe to the company That delivers your office supplies the Payments you owe on the construction Loan that Finance your Warehouse Expansion or the mortgage on your Corporate headquarters building

As with assets liabilities come in two Flavors each representing the amount of Time it should take to repay the Obligations Current liabilities are to be repaid Within one year think of the money for Next week's employee paychecks the Payment your company owes to your office Supply business and payment on a Short-term loan from the bank Long-term liabilities are to be repaid In a period longer than one year think The payments on the company delivery van The mortgage on the company's Distribution facility or the money owed To Holders of corporate bonds Here's a list of the most common Business liabilities from both the Current and long-term categories Accounts payable Accounts payable are the obligations Owed to the many individuals and Organizations that have provided goods And services to your company examples Include money owed to your computer Network consultant your local utility Company and an out of house advertising Agency that your marketing department Uses for ad campaigns Notes payable Notes payable represents loans made to Your company by individuals or Organizations such as Banks and Savings And Loans

The notes could be anything from an IOU Promised to an individual for a small Amount of cash to a multi-million dollar Loan secured from a large Bank Accrued expenses Sometimes a company incurs an expense But has no immediate plans to reimburse The individual or organization that's Owed the money Examples include future wages to be paid To employees interest due on loans and Utility bills Bonds payable When companies issue bonds to raise Money to finance large projects they Incur obligations to pay back the Individuals and organizations that Purchase them Mortgages payable when companies Purchase property they often do so by Taking out mortgages long-term real Estate loans just like the one you may Have on your home secured by the Property itself mortgages payable Represents the mortgages that an Organization has on all its properties Owner's equity Owner's equity is the money that remains When you take all your company's assets And subtract all your liabilities Owner's equity represents the owner's Direct investment in The Firm or the Owner's claims on the company's assets Another way of expressing a company's

Owner's equity is its net worth Net worth is simply a snapshot of your Company's Financial Health for a Particular period of time Here are the two types of owner's equity Paid in capital The money that people invest in a Company when companies such as IBM Ford Motor Company or PepsiCo offer to sell Shares of stock to investors in a Secondary offering new stock or when Companies do an initial public offering Go public for the first time investors Provide paid in capital to the companies When they pay money to buy the stock Retained earnings A company's earnings that are held Within the company the money gets Reinvested not paid out to shareholders As dividends Remember Although owner's equity generally is a Positive number it can go negative when A company takes on large amounts of debt For example to acquire another company Double Entry bookkeeping The accounting equation assets equals Liabilities plus owner's equity is Similar to any other equation a change To one side of the equation causes a Change in the other therefore every Financial transaction you make results In not one but two entries to your Accounting records noted as Double Entry

Bookkeeping Inventory Inventory includes the finished products That you purchase or manufacture to sell To customers as well as raw materials Work in progress and supplies used in Operations although the nature of Inventory may seem simple on the surface The way your accounting system handles Its value is actually quite complex You have two major ways of accounting For the value of your inventory Fifo first in first out under this Method of inventory accounting the Inventory that a company purchases first Is the inventory that it sells first to Customers when prices are rising and When exactly aren't they Rising the fifo Method results in a higher income figure As inventory is sold off to customers L-i-f-o last in first out Under this method of inventory Accounting the inventory that a company Purchases last is the inventory that it Sells first to customers when prices are Rising the lifo method results in a Lower income figure as inventory is sold Off to customers in the United States The Internal Revenue Service and gaap Generally accepted accounting principles Allow the use of either fifo or lifo It's completely up to your organization To decide however after you pick a Method you have to stick with it of

Course as with anything else in life Each method has its pluses and minuses Tip business owners who want to show Higher earnings to their investors Bankers and other sources of financing Have a strong incentive to go with fifo However this higher income comes with a Tax burden which may create a stronger Incentive to go with lifo Lifo reports a lower net income but Results in a lower tax burden the method You choose depends on what you consider More important raising investment funds Or avoiding taxes every company is Different and the choice depends on your Unique circumstances however you should Definitely consult an accountant about The best choice for your business Depreciation Depreciation represents the loss of Value of a fixed asset and is a method Of allocating the cost of the asset over Its useful lifetime depreciation is a Non-cash expense that reduces the value Of an asset due to deterioration Obsolescence or age there are many Different accounting methods to Calculate depreciation methods that Aren't necessarily IRS requirements Straight line Straight line depreciation is the Simplest method of depreciating an asset In the straight line method you divide The cost of the asset by its expected

Lifetime in years Double declining balance The double declining balance method of Depreciation is what's known as an Accelerated method of depreciation Because it pushes the majority of the Total depreciation amount into the early Years of ownership you calculate the Double declining balance by multiplying The book value of an asset the original Cost of the fixed asset less cumulative Depreciation by double its straight line Rate Why would anyone want to accelerate the Depreciation of an asset the main Reasons concern the payment of taxes Under the straight line method all other Things being equal the tax deduction for The asset will be the same each year for The duration of the asset's life however By accelerating the depreciation you can Maximize your tax deduction in the early Years of the asset's life this is a good Thing Some of the year's digits The sum of the year's digits method of Depreciation is another way to Accelerate depreciation for this method You follow these simple steps One determine how many years of life an Asset will have two add the digits Together to create the denominator of a Fraction with the year of depreciation As the numerator in reverse order year

One is year five year five is year one And so on three Multiply the fraction by the asset's Original cost to determine the Depreciation value Modified accelerated cost recovery System Macrs for IRS purposes you must use the Modified accelerated cost recovery System Macrs an accelerated form of Depreciation to depreciate assets Under this system most business assets Will use the GDs General depreciation System in simple terms this means that You can choose from three depreciation Methods with recovery periods defined by The IRS the three methods are the two Hundred percent declining balance method During a GDs recovery period The 150 declining balance method during A GDs recovery period The straight-line method during a GDs Recovery period for example say you own Computer equipment the IRS says you Can't depreciate this equipment across Five years using any one of the three Methods the IRS warns that you can only Depreciate property that you hold for Business purposes and that has a useful Life greater than one year you start Depreciating the asset when you put it Into service and stopped appreciating it When you've recovered your cost

Understanding budgets and estimates one Of the keys to running a successful Business is its owners and managers Ability to predict how the business will Perform financially if you can Accurately predict your firm's Performance you can be certain that you Can deploy resources such as money People equipment manufacturing plans and The like appropriately and in the most Effective way a budget is nothing more Than a written estimate of how an Organization or a particular project Department or business unit will perform Financially Remember the real value in budgets comes When you compare estimates of expected Performance to actual performance when The numbers match you know that your Organization or project is performing Just as it should when the numbers Differ markedly you know that you need To ask the question why and take a very Close look at what's going on the Process of comparing expected Financial Results with actual Financial results is Called variance analysis with the speed Of business increasing all the time why Bother doing budgets at all aren't Things changing too fast for budgets to Be of any value in most cases the answer Is a resounding no budgets offer the Following benefits to organizations that Use them

Budgets are Milestones on the road to Your goals every organization has or at Least should have goals budgets are Quick and easy ways to see whether your Organization is on track to meet its Financial goals if for example you've Already spent half your travel budget But you're only one quarter of the way Through the year you know that you Potentially have an overspending problem Budgets make decisions easier when you Budget a project initiative or business Activity you'll quickly have a picture Of what it will cost armed with that Information you can decide whether the Costs you'll incur make good business Sense or not will you make money or lose Money as a result how much money for how Long the answers are important elements In the decision-making process and they Come from the budgeting process Budgets can be fast A budget can be as quick and simple as a Few figures scribbled onto the back of An envelope over lunch ever heard of Doing a back of the envelope projection A budget also can be a simple one-page Computer spreadsheet not every budget Has to weigh 10 pounds and result in Mass deforestation with simple budgets You can make changes quickly in near Real time and print them out or email Them immediately Budgets can be flexible

Need to hire a few new employees to take Care of an unexpected order no problem a Budget can accommodate the change and Create an up-to-date picture of how your Organization is performing or you can Simply freeze your budget to see the Variance between what your budget Predicted and what really happened Regardless of how fast your markets are Moving you can always keep up no matter Where you are Budgets are fun okay maybe we're Stretching things just a bit here but Honestly creating a budget in which the Actual results match your expectations Is a real thrill the only bigger Thrill Is when your results are even better Than you expected Remember Whereas extensive long-range strategic Planning seems increasingly less Valuable to most organizations today Near-term tactical planning is becoming Incredibly valuable budgets are a very Necessary part of the Tactical planning Process When it comes right down to it you can Budget any activity that has a financial Impact on your organization Want to budget a self-managing work team No problem a research and development Project piece of cake the new Headquarters construction job all in a Day's work

The following list presents some of the Most common budgets used in business Today Cash budget an estimate of a company's Cash position for a particular period of Time by using your current cash position As a baseline you can estimate all cash Inflows sales and outflows expenses During the time period you specify say a Month to determine a projected cash Position at the end of the period Operating budget shows a businesses Forecasted revenues along with Forecasted expenses usually for a period Of one year or less the operating budget Is a top level budget the budgets that Follow on this list are line items in That operating budget Labor budget Takes every person in an organization Department or project and multiplies the Number of hours they're expected to work By their wage rates the result is the Total labor cost to be expended for a Set period of time Sales budget An estimate of the quantity of goods and Services that you'll sell during a Specific period of time In the case of products you estimate Total revenue by multiplying the total Number of units projected to be sold by The price per unit Production budget

Starts with the sales budget and its Estimates of the total number of units Projected to be sold the production Budget then translates this information Into estimates of the cost of labor Material and other expenses required to Produce the units Expense budget Every business from a one-person home Business to a huge multinational Corporation incurs a variety of expenses During the course of normal operations You prepare expense budgets for travel Utilities office supplies telephone and Many other common and not so common Expenses Capital budget If you plan to buy fixed assets with Long useful lifespans many organizations Consider this to mean a year or more the Capital budget is the place to budget For them items in your capital budget May include buildings production Machinery computers copiers furniture And anything else that will still be in Your office Creating a budget what's the best kind Of budget the one that works there are Many different types of budgets and Three key approaches to developing a Budget bottom up top down and zero based Each approach has its advantages and Disadvantages and each approach can work Well although the pendulum is clearly

Swinging in favor of the bottom-up Approach Bottom up in bottom-up budgeting Supervisors and middle managers prepare The budgets and then forward them up the Chain of command for review and approval Middle managers have the benefit of a Close working knowledge of the Organization and its financial Performance as a result bottom-up Budgets tend to be more accurate than Top-down budgets in addition bottom-up Budgets can have a positive impact on Employee morale because employees assume An active role in providing Financial Input to the budgeting process Top down in this approach top management Prepares the budgets and imposes them on The lower layers of the organization Generally without any consultation or Involvement on the part of those outside Of top management Top-down budgets clearly Express the Performance goals and expectations of Top management these budgets however can Be unrealistic because they don't Incorporate the input of the very people Who will Implement them Zero based budgeting The process in which each manager Prepares estimates of his or her Proposed expenses for a specific period Of time as though they were being Performed for the first time in other

Words each budgeted activity starts from A budget base of Zero by starting from Scratch at each budget cycle managers Must take a close look at all their Expenses and justify them to top Management thereby at least in theory Minimizing waste Budgets provide a kind of early warning System that when compared to actual Results can inform you when something is Going wrong and needs your immediate Attention when your expenditures exceed Your budget you can do several things to Get back on track review your budget Sometimes it's the budget not the Spending that's out of line before you Do anything else take a close look at Your budget to make sure that the Assumptions on which it's based are Accurate and make sense in your changing Market if your Market is growing quickly You may need to adjust your estimates Free spending one of the quickest and Most effective ways to bring spending Back in line with a budget is to freeze Spending for example you can freeze Expenses such as pay raises new staff And bonuses Postpone new projects New projects including new product Development acquisition of new Facilities and research and development Can eat up a lot of money If spending is over budget a common

Solution is to postpone new projects Until you have enough Revenue to support Them Be sure to carefully balance your desire To bring spending back in line against The need to develop new products and Services If you're too zealous in this area the Result can be disastrous for the future Growth and prosperity of your company Ask your employees for help Here's an old but very wise saying none Of us is as smart as all of us If your expenditures are exceeding your Budget and you can't sort it out on your Own ask your employees to suggest ideas For getting back into the black chances Are someone in your organization has Some ideas you hadn't considered and These ideas may make the difference Between syncing and swimming Layoff employees and clothes facilities When you're trying to cut expenses The Last Resort is to lay off employees and Close facilities although these actions Will result in an immediate and Lasting Decrease in expenses you'll also face an Immediate and Lasting decrease in the Talent available to your organization in Addition the morale of employees who Survive the budget acts can and likely Will suffer at least for a while One of the managers classic roles is to Control and one aspect of the

Controlling function of managers is the Review and Analysis of accounting Reports managers carry out this function To determine the financial health of the Organization by regularly reviewing Accounting reports and analyzing the Information they present managers can Make better more informed decisions Accounting provides a kind of scoreboard For an organization as such Understanding how accounting works and How to get the most out of accounting Reports is an important skill for any Manager or aspiring MBA Variance analysis Simple way to use a budget to keep your Eye on the numbers is through variance Analysis In simple terms variance analysis is a Comparison of the financial estimates That you budget for a particular period With your firm's actual Financial Results The variance is the difference between Budget and actual which can be a Positive or negative number or zero this Method gives you an immediate picture of Financial issues that may require a Closer look on your part Audits the accuracy of accounting Records and reports is incredibly Important especially to two particular Groups of people the people within the Organization rely on accounting

Information to make informed business Decisions and the investors and lenders Outside the organization rely on Accounting information to make informed Decisions on the use of their funds For these reasons organizations conduct Regular audits of their accounting Systems to ensure that all results are Accurate and that the system treats all Financial information fairly and Honestly There are two key kinds of audits Internal audits conducted by employees Of an organization internal audits serve As an internal check to ensure the Integrity of accounting information and The reports that are generated from this Information Many large companies have entire Departments devoted to this task and Make audits an annual event And with the emphasis on financial Transparency internal Auditors are more Important than ever before in public Companies External audits Examination of a company's accounting System by an unbiased outside individual Or organization most often a certified Public accounting CPA firm or chartered Accountant external audits typically are Conducted on an annual basis after the End of a company's fiscal year companies Use these audits to ensure the Integrity

Of the numbers that go into annual Reports and financial statements and to Guard against fraud Reviewing financial statements is a Great way to start analyzing a company's Financial Health and its long-term Outlook however to get the most mileage Out of these reports you need to Undertake a deeper level of analysis you Must apply financial ratios to the Numbers contained in the balance sheet And income statement and do Financial Forecasting when it comes to assessing The overall Financial Health of an Organization business people worldwide Use three key financial reports these Reports known more precisely as Financial statements are the balance Sheet the income statement the statement Of cash flows Managers often receive a variety of Financial and project reports tailored To their exact needs for instance a Software engineer manager may receive a Weekly labor report that shows her Exactly who worked on the team's Software projects how many hours each Employee worked the cost of those hours And a variance above or below budget An Accounts receivable manager may get an Aging list of receivables that outlines Who owes money to the company how much Is owed and for how long and a Production manager may receive regular

Reports on the cost of returned products Customers didn't approve of because of Quality problems each of these reports Offers a unique perspective for looking At a company's Financial Health and no One financial report can tell you the Full story a Doctor Who's faced with a Patient who has an undetermined illness Doesn't order only a blood test he also Orders a chest x-ray and a complete Physical examination the doctor doesn't Know which test will reveal the source Of the problem so she orders several Different tests likewise you come to Understand the complete picture of your Organization's status only by reviewing All the financial statements and Sometimes by digging even deeper for More information Who reads financial statements If you're a manager or business owner You're probably very familiar with the Three major financial statements a Manager or owner's job description is to Keep closed tabs on his organization's Performance and make changes in the Allocation of company resources to Maintain a high level of financial Return If you're part of a self-managing work Team or if you work for an open book Organization One that shares financial and other Performance data with all employees you

Two are probably familiar with the Financial statements and the information They provide if you're in one of these Positions and you aren't familiar with Financial statements then continue on People in the following lines of work Also pay close attention to financial Statements Banks need financial statements to make Judgments on whether to extend loans or Lines of credit Accountants require financial Information to assess the health of an Organization Investors and financial analysts need Financial statements to determine the Attractiveness of a particular Organization when compared with a wide Range of other investment opportunities What do financial statements tell you Each different type of financial Statement exists for a specific purpose And it provides information that other Statements don't in general financial Statements offer their readers the Following important status information Liquidity the company's ability to Quickly convert assets into cash to pay Expenses such as pay a roll vendor Invoices creditors and so on General Financial condition The long-term balance between debt and Equity the assets left after you deduct Liabilities

Owner's equity The periodic increases and decreases in The company's net worth Profitability the ability of the company To earn profits Revenue that exceeds Costs consistently during an extended Period of time Performance The organization's performance against The financial plans developed by its Management team or employees Remember As you review financial statements for Your organization keep in mind that There's no such thing as a good number Or a bad number unless you made an entry Error a high profit number may or may Not be good news depending on the Situation similarly a low Revenue number May not be bad news again depending on The situation if a particular figure Isn't what you expect it to be too high Or too low research why the number is Different from what you expect in other Words take the time to look beyond the Errand number itself before you suffer a Heart attack or fire your sales staff For example if profit declined from one Period to the next you may view this as A bad thing in fact your boss may say That it's a very bad thing however after Researching the subject you may find the Decline to be a result of your cfo's Decision to draw down profits reduce

Profits by expenditures elsewhere in the Company to minimize the impact of income Taxes on your company definitely a good Thing The balance sheet the balance sheet Gives you a snapshot of your Organization's Financial Health at an Exact point in time Not over a period of time you use this Snapshot to determine the book value of A company's assets and liabilities Including Equity at a particular date Before we move forward we have a Question for you do you know what the Accounting equation is assets equal Liabilities plus owner's equity The accounting equation is the basis for Creating the balance sheet Assets include cash and things that you Can convert to cash Liabilities are obligations debt loans Mortgages and the like owed to other Organizations or people Owner's equity is the net worth of your Company after you subtract all the Liabilities from the organization's Assets In the balance sheet assets are listed In order from the most liquid readily Convertible to cash to the least liquid Liabilities and owner's equity are Listed in the order in which your Company plans to pay them note you can Convert current assets to cash within a

Year current liabilities are scheduled To be paid within a year remember my Reviewing changes in your balance sheets Over time managers Bankers investors and So on can pick up on trends that may Affect the long-term viability of the Firm and that may positively or Negatively impact the value of its stock The income statement Why does a business exist To leave a lasting Legacy in the world Maybe in some cases to employ thousands Of people and pull a city or region out Of an economic slump that threatens the Fabric of the community That's happened on more than one Occasion to save the world perhaps The number one reason that businesses Exist is to make money to make a profit For their owners because making money is Such an incredibly important part of the Day-to-day focus of a business companies Need a quick and easily understood way To figure out how much money they're Making such a tool exists the income Statement Remember An income statement also known as a Profit and loss statement Apnl a report of earnings or a statement Of income and losses gives its readers Three key pieces of information the Businesses sales volume During the Period of the report the businesses

Expenses during the period of the report The difference between the businesses Sales and its expenses its profit or Loss During the period of the report The cash flow statement Have you ever heard the phrase cash is King no not queen or Prince King For any business cash truly is what Matters it takes cash to pay employees To purchase supplies to pay bills and to Execute many more business functions a Cash flow statement also known as a Statement of cash flows by some is a Specialized report that tracks the Sources of cash in a company as well as Its inflows money coming into the Business and outflows money going out of The business the statement is an Extremely valuable tool for ensuring That your company has the cash it needs To meet its obligations when you need it This can mean the difference between Keeping your business afloat and Watching it sync The business World features a number of Different kinds of cash flow statements Each one suited to a particular business Need some work best strictly inside a Business and some work best outside a Business for investors creditors and Other interested parties here are a few Of the most common types of cash flow Statements Simple cash flow statement or cash

Budget arranges all items into one or Two categories most often cash inflows And cash outflows Operating cash flow statement limits Analysis of cash flows to only items Dealing with the operations of a Business not its financing Financing cash flow statement includes Cash raised by issuing new debt or Equity Capital as well as expenses Incurred for repaying debt or paying Dividends on stock Statement of cash flows often an External statement that depicts the Period to period changes in balance Sheet items and the actual dollar amount For the period in question for income Statement items this statement shows the Following categories operating cash Inflows operating cash outflows priority Outflows such as interest expense and Current debt payment Discretionary outflows such as equipment Expense Financial flows things you borrow or Changes in equity Remember although you can find plenty of Different cash flow statements to meet Your every mood whatever you do don't Forget the first and perhaps the most Important rule of cash management Happiness is a positive cash flow having A positive cash flow more coming in than Going out means that you're in a better

Position to meet your current and future Financial obligations