6.1. Basic Accounting Procedures or Analysis of Business Performance

Unit 6 - Basic Accounting Procedures or Analysis of Business Performance
6.1. Basic Accounting Procedures or Analysis of Business Performance
In order to manage a business effectively from the financial perspective, it is always important to measure:
  • Asset structure of the business
  • Profitability of the business How much profit is being generated
  • Analysis of cash flows When the cash is coming in, and
  • How it is being spent.
Accounting is nothing more than the measurement of these processes to reflect what has happened to a business over a relevant period of time. The asset structure (solvency of business) is measured by the Balance Sheet, whilst the profit and cash pieces are measured by the Income Statement / Profit and Loss Account (liquidity of business) and the Cash Flow Statement respectively.

Last modified: Friday, 1 June 2012, 7:30 AM