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1) A few days ago i said something like:
Think of the company's financials as a vehicle
โข Income Statement is the flashy (or beaten up) exterior
โข Balance Sheet is the Fuel Tank
โข Cash Flow Statement is the Engine
Think of the company's financials as a vehicle
โข Income Statement is the flashy (or beaten up) exterior
โข Balance Sheet is the Fuel Tank
โข Cash Flow Statement is the Engine
2) ๐๐ก๐ ๐๐ง๐๐จ๐ฆ๐ ๐๐ญ๐๐ญ๐๐ฆ๐๐ง๐ญ
Something that is often overlooked, especially with newer investors is the fact that income statement is an ๐๐๐๐ซ๐ฎ๐๐ฅ based report of incomes
What does accrual based accounting mean i hear you say?
Something that is often overlooked, especially with newer investors is the fact that income statement is an ๐๐๐๐ซ๐ฎ๐๐ฅ based report of incomes
What does accrual based accounting mean i hear you say?
3) Johnny owns a coffee stand and his friend Sally comes over and buys $20 worth of coffee using a credit card
It is the last day of the financial year, and Johnny reports his income statement tomorrow
But Sally's card payment won't come for three days
It is the last day of the financial year, and Johnny reports his income statement tomorrow
But Sally's card payment won't come for three days
4) The reality of this situation is that Johnny would record $20 in sales on his income statement, despite not actually receiving cash
The $20 in lieu would be an accounts receivable, in that he has provided the product/service but not yet been paid
The $20 in lieu would be an accounts receivable, in that he has provided the product/service but not yet been paid
5) "Accrual accounting is an accounting method where revenue or expenses are recorded when a transaction occurs rather than when payment is received or made"
The income statement can be easily manipulated by management to 'smooth' earnings during good/bad years
The income statement can be easily manipulated by management to 'smooth' earnings during good/bad years
6) If we were to take a look at Johnny's cash flow statement, we would see that he has not been paid $20
The income statement is usually my least important filing that i study
The income statement is usually my least important filing that i study
