BIZ SPONZORS
popular biz reading
Marketing Mix: Promotion
Employee Turnover
Marketing Mix: Price
Planning and Organizing
Maslow's Hierarchy of Needs
Key Performance Indicators
Sustainable Competitive Advantage
Ishikawa Fishbone Diagram
Price Determination
Supply Chain Concept
Employee Induction
3 Basic Finance Statements
Sales Forecast Accuracy
FMCG Sales Boosting
OTIF - On Time In Full
Merchandising at the Point of Sales
Promotion Mix: Advertising
Employee Motivation
Porter's 5 Forces
CHECK ON BIZ DEVELOPMENT
biz sponsors
BrainCast Relaxation
Advertise on Biz Development
My BrainCast
Energy Booster
Twitter
biz archive
2012
2011
2010
2009
2008
2007

My Introspective

by Laurus Nobilis
My BrainCast

Finance Management

Finance Basics: Understanding Cash and Profit (B)

 

 

Profit


 

What is Customer Credit? What are Accounts Receivable? 

 

Posted: Apr 2009


<<< Previously on Finance Basics: The Basic Links

UNDERSTANDING CASH AND PROFIT

Extending credit to customers is one method often used by businesses to help increase sales

CUSTOMER CREDIT

The profit & loss statement records:

• what a company sells during a period, whether or not it is paid for in cash.

The cash flow statement records:

• only actual cash that moves in and out of the company.

The balance sheet records:

• The amount owed by customers - an asset called accounts receivable

 

Account Receivable

 

ACCOUNTS RECEIVABLE

The money owed by customers will enter the cash flow of the company in the period when the accounts are paid.

Accounts Receivables

RETAINED EARNINGS AND PROFIT

Profit or loss made in previous periods and kept in the company

 = Retained Earnings

Both retained earnings and profit/loss of the current period are recorded under liabilities on the balance sheet.


Business Case Study

Business Case Study

 

DAY TWO

Lots of hungry children want to buy a sandwich, but don't have money with them.

JS can sell more, if the children are allowed to buy now and pay tomorrow, after getting the money from their parents. s

JS orders two boxes of sandwiches from fast food and keeps track of the credit given.

Business Finance

KEY TIPS

The Profit & Loss Statement shows what is sold

The Cash Flow Statement shows what is paid for in cash

Therefore: Profit/Loss does not equal to Cash Flow

Credit extended to customers appears on the assets side of the balance sheet as accounts receivable

Extending credit to customers squeezes cash flow

The balance sheet shows retained earnings on the liabilities side  

>>> Next on Finance Basics: Delaying Cash Payments

 

 

 

My BrainCast Self Improvement
blog comments powered by Disqus
 
     
My BrainCast My BrainCast energy Booster My Braincast Deep Sleep
My BrainCast Mandala Meditation My BrainCast Relaxation
my-braincast