Cash vs Accrual Accounting

Cash vs Accrual Accounting You have finally taken the leap and started the business you have always dreamt about. However, now you must make one more tough decision: what accounting method should your business follow? Accounting methods are rules and…

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The Importance of the Income Statement

The Importance of the Income Statement There are four basic financial statements: Balance Sheet, Cash Flow Statement, Income Statement and Statement of Retained Earnings. External users such as investors, creditors, etc. use these statements to gain insight into the financial…

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New Revenue Recognition Standards Are Now REAL

New Revenue Recognition Standards Are Now REAL For nonpublic companies, the new revenue recognition standards that the Financial Accounting Standards Board (FASB) implemented are now a reality.  FASB 606, Revenue from Contracts with Customers, is effective for fiscal years beginning…

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Liquidity Ratios #3 (3-part series)

Management uses financial data to determine the success for the company. In the first two parts of the series, I discussed profitability and efficiency ratios. In this blog, I will be discussing liquidity ratios that management uses to meet their…

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Efficiency Ratios #2 (3-part series)

In this blog, I will be discussing efficiency ratios. Efficiency ratios are used internally to check if the company is utilizing their assets and liabilities efficiently in earning revenues. Efficiency ratios are mainly used to assess how well assets and…

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Financial Ratios #1 (3-part series)

Financial data by itself may not give the complete picture about a company’s performance and financial wellbeing. It is difficult to evaluate standalone numbers without comparing them to certain norms and standards. Ratios provide a set of standardized parameters which…

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Understanding the Income Statement

The income statement is one of the three major financial statements.  The other statements are the balance sheet and the statement of cash flow.  The purpose of the income statement is to report the company’s earnings over a certain period of…

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