Key Principles For Sound Measurement



Key Principles For Sound Measurement

Introduction

Many people start doing businesses, in the initial stages they have to face numerous problems pertaining to profitability, market share, customer base, debt financing, and many more. It is a universal rule that initially one has to bear negative profits, low sales, and some other related issues. The one who thoughtfully and tactfully handles each and every issue and remains working with same passion, dedication and commitment, wins. For success, effective management of resources is highly recommended and required so to get maximum returns with minimum cost. Hence, effective check and balance is required on the financial health of the company (Eisen, 2000). It is very important to measure the value of assets in the business, the required sources of finance to meet business investments, the return business is generating and the inflow and outflow of cash within and outside the business. In order to keep a record and ease of access to all such data, accounting is required. Accounting is nothing but recording of day to day business transactions and adjusting them appropriately for a particular period of business (Principles of Accounting, 2012).

Discussion

The financial performance of an entity is shown very clearly in the Income statement as it contains all the revenue items decreased by the cost incurred for such operations e.g. operating expenses, admin and selling expenses and cost of sales. The Balance sheet or the statement of financial position shows the clear vision of all the assets, debts and equity a business possesses. A financial statement is a form of long report prepared to highlight the business performance over the financial period (Eisen, 2000).

In order to successfully manage all these accounts, proper understanding of accounting, preparing the financial reports and interpreting and analyzing them is a must so to make the decisions accordingly (Jansen, 2010). Cash flow statement is prepared to analyze the flow of cash inside and outside the business. It is very useful statement as it shows the liquidity of the business. Liquidity of an entity means if all the debt is due today then how much entity can pay it off. More liquid more better and vice versa. Statement of Changes in Equity entails all the pertinent changes in the equity of the entity over the financial period. Notes to the financial statements are also an integral part of the report and they contains all the necessary requirement s and disclosures with detailed information of the Introduction (Eisen, 2000).

Many people start doing businesses, in the initial stages they have to face numerous problems pertaining to profitability, market share, customer base, debt financing, and many more. It is a universal rule that initially one has to bear negative profits, low sales, and some other related issues. The one who thoughtfully and tactfully handles each and every issue and remains working with same passion, dedication and commitment, wins. For success, effective management of resources is highly recommended and required so to get maximum returns with minimum ...