Log in Alexander Kleinhans 12 years agoPosted 12 years ago. Direct link to Alexander Kleinhans's post “Sorry but what were the t...” Sorry but what were the three main statements? I know of Cash Flow Statements, Income Statements, and what? • (7 votes) yurigeylik 12 years agoPosted 12 years ago. Direct link to yurigeylik's post “The three major financial...” The three major financial statements are Balance Sheet, Income Statement, and Summary of Cash Flows (28 votes) Sam Dangremond 13 years agoPosted 13 years ago. Direct link to Sam Dangremond's post “Isn't the sign on the "AR...” Isn't the sign on the "AR increase" wrong? If this value is defined as an "increase" then the value should be positive - or, alternatively, this value should be defined as "AR decrease"? • (11 votes) Marshall Stanton 12 years agoPosted 12 years ago. Direct link to Marshall Stanton's post “It's a negative in terms ...” It's a negative in terms of cash flow, because it's cash that hasn't yet come in. It would be positive if they actually gave you cash instead of an I.O.U. So you could also think of it as money that you lent them for a time, or credit you've extended to them, in the form of your service. It's a positive in terms of assets and equity, however, because it imposes an obligation on someone to pay you money in the same way that a bond or a loan would. (19 votes) Marshall Stanton 12 years agoPosted 12 years ago. Direct link to Marshall Stanton's post “Wouldn't it be more prope...” Wouldn't it be more proper to say that the cash at the end of the month is $0 and you have a corresponding $100 liability to the bank (with whom we are overdraft) instead of saying that we have -$100 cash? Numerically, it works out the same way, but the way I described I think would make more intuitive sense, no? • (4 votes) brianjpeter 12 years agoPosted 12 years ago. Direct link to brianjpeter's post “Simple answer,It is a...” Simple answer, It is a logical way to think about it, but the problem is that you are creating a liability that is not backed by a source document. ( Bank Statment, Invoice, Bill, ect...) Because the bank account is designed to let you have a over draft, and the cash or bank account usually is linked directly to that account, we like to keep that account as accurate to the bank statement you will receive as we can. An account is allowed to go negative, its just not a normal situation when it does. More complicated and accurate answer, I haven't gone through all the video's yet but another reason why this is inadvisable is because at some point, usually on a monthly basis, we will need to record a Bank reconcilliation. To be brief, You are recording what you have done to your bank account and the bank sends you a statement showing what they have done. You do not look at any other account other than your Bank account during this process. The rest of your chart of accounts is Dead to you. In an ideal world the bank statement and your bank ledger should match perfectly, but everynow and then, they mismatch because the bank statement may be printed before a transaction has been processed, or you are not aware of the charges that the bank has charged you on there end. You would make journal entries to adjust for this where necessary. This bank reconciliation only works when the assumption that you and the bank are working on the same principles of depositing and withrawing from you account. If you record the overdraft outside the bank account, suddenly your statement becomes slightly more troublesome as it shows up no where in you bank account on your reccords, but the bank clearly shows it. (7 votes) Baba Woods 12 years agoPosted 12 years ago. Direct link to Baba Woods's post “How do you read and inter...” How do you read and interrupt a cash flow statement • (1 vote) Mike Moyle 12 years agoPosted 12 years ago. Direct link to Mike Moyle's post “With a lot of cross-check...” With a lot of cross-checking. The Balance Sheet and Income Statement are what someone who is interested in the financial health of your business is really interested in. The Cash Flow Statement just proves that everything balances out. So when you read the Cash Flow Statment you cross-check the numbers on it against the other two statements, and make sure they match. Also, you would be looking for numbers that were too high or low, like liabilities far in excess of the revenue, as compared with other business of the same type. If you saw something like that, you would ask the business for an explanation. (6 votes) Safia Osmany Muna 11 years agoPosted 11 years ago. Direct link to Safia Osmany Muna's post “Is there any serial in vi...” Is there any serial in video's or chapters to study accounting from beginning to ending? How should one watch the video's ?Start from where?There should be chapter 1,2,3. like this.Please give some advice. • (2 votes) Andrew Blemings 11 years agoPosted 11 years ago. Direct link to Andrew Blemings's post “Not listed. They're in th...” Not listed. They're in the order they should ideally be watched in under the "Accounting and Financial Statements" menu. That seems to be the order in which they were made, at least. That being said, there aren't any videos that start from the "very beginning" with the accounting formula, or with an explanation of what assets and liabilities and equity actually are. If you feel you're not quite following along, Google "accounting videos" and you'll find a lot of other free resources that can explain it all to you. :) (5 votes) Jacob Mathew 9 years agoPosted 9 years ago. Direct link to Jacob Mathew's post “How the net profit/loss o...” How the net profit/loss on a cash based income statement differs from the closing balance of cash on the statement of cash flow? • (3 votes) Tejas 9 years agoPosted 9 years ago. Direct link to Tejas's post “Net income on income stat...” Net income on income statement is the change in the value of equity on the balance sheet. Net income is used as an input to calculating cash flow from operations. Cash flow from operations, cash flow from investing, and cash flow from financing are summed to calculate the net change in cash. Net change in cash represents the change in cash on the balance sheet from the start of the period to the end of the period. (2 votes) Kathy Larsen 11 years agoPosted 11 years ago. Direct link to Kathy Larsen's post “What is the difference be...” What is the difference between the accrual basis acct'g and cash basis acct'g? • (1 vote) Ryan 11 years agoPosted 11 years ago. Direct link to Ryan's post “For cash basis, the only ...” For cash basis, the only time a transaction is recorded is when cash is exchanged. You sell someone a product, they pay you in cash, therefore you recognize revenue. Accrual basis does not require cash to change hands in order to record a transaction. There are different rules. For example, you would recognize revenue when you have delivered a good or service and you are expected to receive payment in the future. Cash hasn't changed hands, but a transaction still has happened. (5 votes) julian gordon 8 years agoPosted 8 years ago. Direct link to julian gordon's post “how can I obtain some pra...” how can I obtain some practice problems? • (2 votes) Tosca Lesley Kotze 10 years agoPosted 10 years ago. Direct link to Tosca Lesley Kotze's post “If I take a loan (in my p...” If I take a loan (in my personal capacity as an owner of a company) , on an asset which does not belong to the company - but belongs to me, personally - and I bring this CASH into the business.....how would I account for this in the Cashflow statement ...and in the Balance sheet (if my company is running at a loss) • (1 vote) Karie Sheils 10 years agoPosted 10 years ago. Direct link to Karie Sheils's post “The loan would show up on...” The loan would show up on the Balance sheet as 'Cash' on the Asset side and as Owner's Equity (since it is your personal asset you are giving to the company) on the Liabilities side. You would note the cash asset on the cashflow statement as owner's investment. (2 votes) Dunja Dizdarević 5 years agoPosted 5 years ago. Direct link to Dunja Dizdarević's post “Would you add or subtract...” Would you add or subtract the change in accounts payable from the net profit figure? • (1 vote) Andrew M 5 years agoPosted 5 years ago. Direct link to Andrew M's post “An increase in accounts p...” An increase in accounts payable represents cash that has not been paid out, so it gets added to net profit. A decrease in A/P represents cash that was paid out out, so it gets subtracted. (2 votes)Want to join the conversation?
Video transcript
In the last video, using theaccrual basis for accounting, we had $200 ofincome in month two. But over that samemonth, we saw that we went from having $100 in cashto having negative $100 in cash. So we actuallylost $200 in cash. So how can we reconcilethe fact that it looks like we made$200 in income, but we lost $200 in cash? And that reconciliation is goingto be done with the cash flow statement. So most cash flowstatements-- so I'm going to do a cash flowstatement right over here-- so they'll startwith your net income. Or actually, they'llstart with the cash that you started out with. So they take you from this cashbalance to that cash balance. So they'll say somethinglike starting cash. Starting cash weknow is at $100. And then they'll say, well, inthe most naive interpretation of things, your netincome in theory should be cash you'regetting or at least it's some type of profit. You're getting someassets in the door. Or at least you'recounting as if you're getting some assets in the door. So then you have your netincome during the period. And here we'll literallyjust take whatever's reported from theincome statement. So over there, weget $200 net income. And now, we have to dothe reconciliation part. Because if this was allcash that you were getting, then you should have $300 incash at the end of the period, which we clearly don't have. So we have toreconcile by looking at the changes in differentthings on the balance sheets. Over here, we have a netchange in accounts receivable. So we have an increasein accounts receivable. So I'll call it AR Increase,AR short for accounts receivable just tosave some space. So let's just think about it. When you have an increasein accounts receivable, you're lettingpeople owe you money. You're lettingpeople owe you $400. If you didn't let them oweyou, that would have been cash. So you're kind ofpushing back the time that you're getting cash. This is $400 that youdidn't get that maybe you could have gotten if youdidn't allow this person to delay when they paid you. So an increase inaccounts receivables is actually less cash than youwould have otherwise gotten. So this is negative$400 for your cash flow. And we had no other changes. I don't even addressaccounts payable here. That's essentiallypushing back owing people, paying other people,paying your vendors money. But I don't even addressthat in the previous example. No other changesin our liabilities. So this is the onlyadjustment we make. And so if we do this--and sometimes this will be called a use ofcash or a subtraction from or there's differentways it can be phrased in different contexts--but over here, you'll have your netcash from operations, cash from operations. I'll just say ops. And over here, you cansee, when you add it all, just the cash fromoperations, $200 minus $400. So I'm just adding thispart right over here. You have negative $200. And so your startingcash is $100. You have negative $200cash from operations. And this is what youwould have also gotten if you had done cash accounting. You would have had negative$200 cash from operations. And then if you start with$100, you use $200 in cash, your ending cash willbe negative $100. So this little thingthat I just created here, this little reconciliationbetween the positive $200 in income and thenegative $200 of cash, and showing how we got fromthis starting point in cash to this ending point, thisis a cash flow statement. So you now know the threemajor financial statements.
