Root Causes of Inadequate Cash Flow in the Retail Sector
In the previous articles, we have already seen how important cash flow is for the retail sector. We have also explained how the lack of adequate cash flow can be a cause of concern and even causes many retail businesses to shut down. However, the fact that retail businesses have cash flow issues is an […]
Problems Related to Facebook, WhatsApp, and Instagram Mega Merger
In the previous article, we talked about Facebook’s plan of becoming a social media conglomerate by merging different apps like Facebook, WhatsApp, and Instagram. We also spoke about the enormous economic benefits that Facebook as a corporation will derive from the merger of these diverse apps. However, for the moment, it does not seem like […]
The Sinister Motive Behind Cashless Society
Cashless society is the latest buzzword in global finance. At the present moment, only 15% to 20% of the world’s money exists in the form of currency notes. This itself is an absurdity. However, many central banks and governments all across the world have pledged to bring the cash percentage down to zero. This means […]
Capital Controls: Meaning, Types, Benefits and Downside
What are Capital Controls ? Capital controls are when the governments of nations restrict the inflow and outflow of capital into the economy. In a free market economy, there should be and would be no borders. However, this is not the case in reality. Countries want to ensure that their economies stay relatively stable in […]
Advantages and Limitations of a Budget
In the previous article, we learned about the three financial statements. We also learned how income statements and balance sheets are backward-looking financial statements. We also understood that the budget is the only forward-looking financial statement in the personal finance domain. It is the only statement that can be used to prevent economic mistakes from […]
Every activity that a business firm does must be done for a reason and accounting is no exception. Accounting helps the company achieve a myriad of objectives. Here is the list of objectives that accounting helps the company to obtain.
Any business firm needs a permanent record of the transactions that it indulges in. These records could be required for internal purpose, for taxation purpose or for any other purpose. Accounting serves this function.
Whenever the organization commits any resource of monetary value either within the firm or outside the firm, a record is made. This permanent record is held on for years and can be retrieved as and when need be.
A business firm may indulge in numerous transactions every day. It may make profit in some of these transactions while it may make losses in some other transactions. However, the effect of all these transactions needs to be aggregated over a period of time.
There must be daily, weekly and monthly reports which provides information to the organization about how well it is performing its activities. Accounting serves this purpose by providing periodic financial statements which help the firm adjust their operations accordingly.
Firms need resources for their functioning. They do not have any capital stock at hand and need to obtain them from investors. Investors will give money to the firm only if they have reasonable assurance that the firm will be able to generate enough profit. Past accounting records help a great deal in proving this. All kinds of investors from banks to shareholders ask for past accounting details before they trust the management with their money.
Firms can also conduct useful internal analysis with the help of accounting data. Accounting records tell the firm what resources were committed to what activity and what time. These records also summarize the return that was obtained from these activities. Management can then analyze past behavior and draw lessons about how they could have performed better and used resources more efficiently.
Accounting helps management and investors look forward. Costs and revenue growths can be projected after substantial data has been accumulated. The assumption made is that the company is likely to behave exactly as it has done in the past. Thus, analysts can make reasonable assumptions about the future based on the past record.
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An Overview of Contracts and Why They are Important to Business and Society
February 12, 2025
