Running a business in an efficient manner includes understanding important terms that will enable the company to maintain its financial stability. While most firms have an accountant to assist them in record-keeping, there are still basic terms that ought to be familiarised as they will be commonly used in the world of business.
Besides knowing the different accounting terms, you should also understand how it is used in regular business practice.
These terms are usually used and applied in the early stages of business development when new owners begin their venture into entrepreneurship. It enables owners to recognise the difference between profit and loss, debts and credit, income, and expenses, etc. This applies to all types of business entities in Indonesia.
What is a Financial Statement
Financial statements usually provide an overview of the business details including:
Statement of Financial Position (SFP)
Statement of Comprehensive Income (SCI)
Statement of Cash Flows (SCF)
These documents will then be summarised into the financial statement and presented to the business owners to aid the upper management to make important decisions for the business and controlling assets
Cash Flow Financial Reports
This report shows the detailed information on how and where the cash of a business is being used. There can be different types of cash flow used to run the daily operation depending on the nature of the business.
Financial statements act as communication data as they are shared throughout the whole business and are being reviewed to provide financial decisions and analysis by the accounting department for the business.
Known as a “statement of financial position”, a balance sheet is designed to reflect the value of a company or organisation. The balance sheet reveals the company’s assets, liabilities, as well as the owners’ equity (net worth) as of a particular date and it goes with two other key financial statements, income statement and a statement of cash flow.