What is a Reporting Period? A reporting period, also known as an accounting period, is a discrete and uniform span of time for which the financial performance and financial position of a company are reported and analyzed. In other words, the data contained in the financial statements are generated by the company’s finance professionals from…
Understanding Revenue: Meaning and Why It Matters Revenue is the value of all sales of goods and services recognized by a company in a period. Revenue (also known as sales) forms the beginning of a company’s income statement and is often considered the “Top Line” of a business. Expenses are deducted from a company’s revenue…
What is the Full Disclosure Principle? The Full Disclosure Principle states that all relevant and necessary information for the understanding of a company’s financial statements must be included in public company filings. For example, financial analysts who read financial statements need to know what inventory valuation method has been used, if there have been any…
What is Forensic Accounting? Forensic accounting is the investigation of fraud or financial manipulation by performing extremely detailed research and analysis of financial information. Forensic accountants are often hired to prepare for litigation related to insurance claims, insolvency, divorces, embezzlement, fraud, skimming, and any type of financial theft. Preparing for Litigation You might have heard…
What is the Operating Cash Flow Formula? The Operating Cash Flow Formula is used to calculate how much cash a company generated (or consumed) from its operating activities in a period, and is displayed on the Cash Flow Statement. The formula for each company will be different, but the basic structure always includes three components:…
What is Accounting Income? Accounting income is the profit a company retains after paying off all relevant expenses from sales revenue earned. It is synonymous with net income, which is most often found at the end of the income statement. The metric differs from gross income in that the latter accounts only for direct expenses,…
What is the Statement of Comprehensive Income? The statement of comprehensive income is a financial statement that summarizes both standard net income and other comprehensive income (OCI). The net income is the result obtained by preparing an income statement. Whereas, other comprehensive income consists of all unrealized gains and losses on assets that are not…
What is Cash Flow from Operations? Cash flow from operations is the section of a company’s cash flow statement that represents the amount of cash a company generates (or consumes) from carrying out its operating activities over a period of time. Operating activities include generating revenue, paying expenses, and funding working capital. It is calculated…
Accounting Profit vs. Economic Profit Accounting profit is a company’s net earnings on its income statement, whereas economic profit is the value of cash flow that’s generated above all other opportunity costs. This guide will help you thoroughly understand accounting profit vs economic profit, and while they may sound similar, they are actually quite different….
What is a Closing Entry? A closing entry is a journal entry that is made at the end of an accounting period to transfer balances from a temporary account to a permanent account. Companies use closing entries to reset the balances of temporary accounts − accounts that show balances over a single accounting period −…
