Business Finance: Elements of Financial Statements, Implementation of Concepts, Enhancing Cash Flows

BUSINESS FINANCE

Contents
PART A...........................................................................................................................................1
Executive summary................................................................................................................1
i.) Elements of financial statements........................................................................................1
ii) The implementation of concepts to company to show the way the company is being
managed..................................................................................................................................2
iii) Recommended steps to be taken to enhance company’s cash flows of company............3
PART B............................................................................................................................................4
Executive summary................................................................................................................4
i) Understating of budget formation.......................................................................................4
ii) Implanting of methods and cost management...................................................................5
iii) Evaluation of traditional or alternative budgetary system................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

PART A
Executive summary
Business finance is essential to construct the organisational structure and run the business
activities to generate profitability. This part states the profit and loss account nature and cash
flow with bifurcating the characteristics. Application of the concepts in order and after
implementing impact is analysed subject to working capital management.
i.) Elements of financial statements
a) Meaning and distinguish of profit and cash flow
Profit and loss account states the profitability of organisation, the excess receipts over
payments is recognised as a profit and the excess of payments over receipts is considered as loss.
The profit and loss account has a nominal nature and it is prepared on accrual concept (McLean
and Zhao, 2014).
Cash flow presents the position of available cash in the entity. This statement is prepared
during the end of each year. the real accounts are considered in this statement (Apăvăloaie,
2014). As how much cash is generated and spent through operation, investing and finance
activities are recognised at the end of the year.
Individuals perspectives state that positive cash flows are recognised beneficial for
companies but it’s not true because there is a big difference found among profit and loss and
cash flow statements it can be understand as follows:
Basis Profit and loss Cash flow
Nature It is a nominal nature of
account. That is based upon
accrual concept.
It is a real account and
prepared on the basis of
receipts and payment
accounts.
Recognition of transactions All the outstanding and
prepaid expenses are included
in profit and loss account.
Transaction of current year
which are happed in cash are
only recognised in cash flow
statement.
b) Meaning of working capital, inventory, receivable and payables
1