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Cash Flow Statements and Accounting Applications

Cash flow statements are one of the four financial statements prepared by the management at the end of the financial year in accordance with the accounting standards. It is concerned with the inflow and outflow of cash in a given time period from operating activities, investing activities and financing activities (not necessarily in the mentioned order). That means it is based on a cash basis of accounting as opposed to accrual basis used in the balance sheet and profit and loss statement. It shows a picture of the ability of the company to pay expenses including payroll and interests. A strong statement is required by investors if they are to make a decision when it comes to investing in business. In addition, for the business to invest for expansion, it has to study the statement.

Of course, the management needs to know the result of operating the business and whether the current projects are feasible or not. In addition, being in profit may not lead to sustainability of the business if its incomings are not able to cover immediate expenses or meet immediate current liabilities. It is of no use if the business has not enough cash to pay its employees but its accrued income – and thereby its profit is high.

As per Generally Accepted Principles of Accounting (GAAP), cash flow statements can be prepared in two ways: direct and indirect. The latter mode is deemed appropriate because it shows the relation between net income and cash from operations. Moreover, it starts with accrual method’s net profit (or loss) and proceeds further. The former mode, on the other hand, presents a summary the cash flows from various activities only.

Despite the name, non-cash items including leasing to purchase an asset, conversion of debt to equity, exchange of non-cash asset, liabilities for similar non-cash assets, or liabilities, and issuance of share in exchange for assets should also be recorded. This can be done as a note or within the statement itself, as the management deems suitable. Also disclosed in the notes are any significant noncash transactions like depreciation, amortization or impairment loss.

Accounting applications help in making accurate information to be presented in cash flow statements. Direct method or indirect method, applications are capable of preparing precisely – after all, it comes from the journal entry that is made in the initial stages of accounting, and the app makes sure of it – what the management wants. The management can see the flow of cash at any period of time in the fiscal year. In addition, because its data is linked with the “cash” part in the balance sheet, having accurate figure helps a lot. Moreover, there is also the feature of security, an authenticity that comes with the apps.

Auto Financing and Making the Most of Your Credit

Are you looking for a new car? Chances are that you’ll be financing that new vehicle. The rising cost of new vehicles has made it increasingly difficult for consumers to purchase a car outright. Financing is a valuable tool that allows you to drive the car that you need and pay for it over time. However, not all lenders are created equal. Likewise, not all consumers are given the same interest rate on their auto loan. Being an informed consumer puts the power in your hands. By knowing the game being played, you can control that game. Here are a few tips to help you maximize your buying experience and get the best loan possible.

o Know Thy Self – When you apply for a loan, the first thing that prospective lender does is pull a copy of your credit report. This report (and the associated credit score) determines the loan that you will get, or even if you will get a loan. Knowing what the lender will see will take the surprise out of the process. You are entitled to a free copy of your credit report each year. Use this tool to your advantage. If your report is less than stellar, take steps on your own, such as paying off debts, remaining current on payments and negotiating payment arrangements with delinquent accounts.

o What’s Your Score – While your credit report is an incredibly valuable tool, you’ll also need your credit score. This is not included in the credit report, which comes as a surprise to many consumers. Be warned; you will have to pay for you credit score from each of the credit bureaus.

o Know Thy Friends – Know the lenders with whom you are applying. Applying for an auto loan blindly is an easy way to be taken for a ride. Apply with prime lenders first, as you will get the best deals through them. Only if you have exhausted the pool of prime lenders, should you consider using a subprime lender. In addition, there are other tools at your disposal. If you are a member of a credit union, apply through them. If you have been a long-standing member of a local bank, consult the loan officer. Never limit your options to auto lenders.

o Know Thy Enemy – In this case, the enemy is the dealership. While they provide the automobile that you need, they mask the true cost of the vehicle behind a screen of dollar signs. By getting the consumer to focus solely on the monthly payments, they hide the true cost of the vehicle. Financing through a dealership may be a viable option, but it is often a poor decision. Dealer-financed loans are frequently some of the most expensive in the industry. Find out what fees (in addition to tax, tag and title) are listed in the contract, as well as the interest rate charged by the F&I office. By knowing their tactics, you can avoid being hit with sticker shock when you sign your loan papers.