Accounting - Preparation of reports

Preparation of reports

The cash report, the Profit and Loss statement, and the balance sheet are
regarded as 'position statements'.

Position statements reflect:

CASH
PROFIT
WEALTH

For example, statements of receipts and payments
Profit and Loss
Balance Sheet

Cash budget

Application

Prepaid rent

31 May
Bank
6 000
31 May
Rent expense
4 000

Balance
2 000

6 000

6 000

When preparing or reconstructing a record to determine dollar amounts it
is important that the relevant amount go to the correct position statement.

In the example above:

* $6000 = cash position. It is the amount paid

* $4000 = profit position. It is the amount incurred

* $2000 = wealth position. It represents a future benefit

Previous | Next