Cash flows from your company’s operating activities are the most important ones in terms they show whether your very core of business is generating or losing cash. A sustainable business is always earning cash so it’s important to have cash flows operating activities positive. Should it be that they are negative, it’s important to understand the reasons behind and ensure that it’s one-off and not a regular thing. Continue reading
Author Archives: Karl
Statement of cash flows
Cash flows are in fact very important for your company. ‘Cash’ in itself is a resource usable for everything your business needs to keep on running – buying goods to sell, paying for wages, buying services and so on. It’s also a resource to be paid as dividends, i.e. owner’s income from the operations of the company. Continue reading
Account within entity’s equity that change very rarely
As a matter of fact, as a comparison, if cash and cash equivalents is the account that changes most often, equity accounts, like share capital and reserves, are the ones that change the less. Continue reading
Account that changes most often within equity
Accounts within the equity that change most often are those which have their figures being changed without any specific decision required from the owners alongside with legislative bureaucracy. Whilst making payments into share capital and other reserves are structured by agreements between owners (if there are any), by articles of association and so on, there’s an account that changes without any of this. Continue reading
Reporting on paying dividends
Reporting (and accounting) for paying dividends is in fact rather straight forward.
Say that during the reporting period your company paid dividends in the amount of 2,100 as within our example statement of changes in equity. Reporting and recognizing an accounting entry on paying dividends whilst the equity has several accounts is done from one account only. Payments out of other equity accounts are labelled as ‘payments out of equity’ or something similar, but normally not ‘dividends’. As dividends refer to payments out of something that has been earned, payment of dividends is always done out of ‘retained earnings. Continue reading
An example of statement of changes in owner’s equity
Statement of changes in owner’s equity is something you’d prepare rarely, and if required, once a year when you’re preparing your Annual Report, at least. Continue reading
Is it an accounting estimate or an accounting principle that’s being changed?
The thing with changes is that whilst they’re allowed under certain circumstances, it’s always the question of whether something really counts for a change in principle or it’s just a change in an estimate. An accounting estimate also results in a change sort of, either an impairment, a new model for calculating an allowance etc. As you’re using new methods for accounting in certain areas, it’s easy to get things mixed between change in an accounting principle and accounting estimate. Continue reading