P&L A/C & CFS

Profit & Loss Account and Cash Flow Statement



Accounting for Managers

Introduction

The purpose of this paper is to provide an informative idea behind the accounting and accounting heads and how its different statement is used in UK companies. Accounting assists small and large business in making their effective and positive decisions. Therefore, the main motive of accounting is to keep record on daily business transaction which further helps to determine the earnings and expenditure incurred in particular year. It also determines those areas from where income/revenue can be generate or increased can expenditure can be reduces.

In this paper, we will examine importance of financial statement, beside this, the paper will focus on differences & usefulness of Profit &Los account statement and Cash Flow Statement. After this, the paper will discuss and Review the debates of accrual Vs Cash basis & its impact on the usefulness of P&L A/C. Hence, the main analysis will be on comparing and contrasting the types of information, and its value to users published in profit and loss accounts and cash flow statements of UK companies.

Discussion

Financial statements are considered as an important tool by investors and other stakeholders for evaluating companies' performance and to assure the company's financial standing in the market. After evaluating the financial statement of company, investors decide whether to invest or not invest in the company, hence this has become an important deciding factor for investors. Through this, investors can interpret areas in which company has potential to growth and area where company significantly could incur losses. Company track their earning and loss incurred in last few years and what action they have taken for the improvement through investment in profitability project also reflect in the financial statement reporting (Lunt H., 2008, pp. 429).

Furthermore, financial statement indicates the past trend that company has been experiencing such as in UK, companies in 2008 had suffered a huge losses and these losses has affected the entire structure of the companies. Moreover, comparison with 2008 trend to 2009, the difference will be highlight which will indicate that companies has taken measures to overcome the losses. Such information will only be available in company accounts rather than somewhere else. This information is very useful or internal and external users, as on the financial figures, investors' decision are only based on these financial information.

The manager annual reports which also assist investors in determining those reoccurring factors which have impacted on the financial statements and contribute evidences that regarding the future measures in order to avoid such dangerous events in future. These financial statements are also useful in companies meeting when management refer to their previous trend and projections. Hence, the company financial report comprise of four statements in which the entire financial transaction and their effect has been recorded (Lunt H., 2008, pp. 435).

Type of Financial Statement Four key elements that indicate the financial standing of the company are:

Balance Sheet Statements

Profit and loss Statements

Cash Flow Statements

Shareholders' Equity Statements

Each statement demonstrates ...