Use of Computers in Preparation of Cash Flow Statement || Preparation of Financial Statements || Bcis Notes

Use of Computers in Preparation of Cash Flow Statement || Preparation of Financial Statements

Use of Computers in Preparation of Cash Flow Statement

Computers help accountants store and access financial records, make changes and alleviate the need to keep paper files. If paperwork is needed, computer files can easily be accessed and printed along with any changes the accountant makes at any given time.

A cash flow statement is a financial statement that summarises the amount of cash that enters and leaves your business, giving you more information about the amount of working capital that’s available over a given period. It includes all the cash brought in from sales, but not sales made on credit that hasn’t actually been paid for.

Similarly, it won’t show raw materials and other items that have been purchased on credit but not paid for. In short, cash flow statements are a measurement of how well a company is able to generate cash to fund operating expenses and pay debt obligations.

What do cash flow statements show?

A cash flow statement provides insight into changes in your cash on hand. This means that it covers three key aspects of your business activities. These are as follows:

Operating activities

This refers to regular business activities. Inflows include revenue from selling products or services, dividends received by the business, interest, and other cash receipts, Outflows include payroll, overheads, taxes, and payments to suppliers and vendors.

Investing activities

This refers to gains and losses from investments. Inflows include sales from business assets and payments from loans made by your business, Outflows include purchases of assets and loans made by your business.

Financial activities

This refers to capital that’s raised externally. Inflows include any money that’s been borrowed, as well as sales of your company’s securities. Outflows include dividend payments and servicing debt.

Why are cash flow statements important?

Cash flow statements are important for a variety of reasons. Most importantly, companies need to be aware of their cash position. If you don’t have a handle on your cash flow, you may not be able to spot trends in your cash flow management that could have a significant effect on your business’s financial health. For example, while your business may appear profitable, slow invoice collections may create a bottleneck that stops you from meeting your financial obligations. To get an accurate picture of your cash flow, you’ll need to produce a cash flow statement.

Data management activities form the foundation for many activities that businesses perform. Computers make it possible for companies to organize and manipulate massive amounts of information productively. Larger corporations may use multiple SQL Server databases to oversee data operations while smaller businesses might take advantage of the data manipulation features in applications such as Microsoft Access. Regardless of your business’s size, you probably work with information and need to store it. Business websites also use database software to sell products and even give people the ability to join their sites. If you have a website, you can set up data management software yourself or hire a company to manage it for you.

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