Accounting #7 - Consolidation and Cash Flow
Accounting for Economic Entities is a topic that made sense to me. This is where you combine the Coles empire in a single consolidated statement (group includes Coles, Bi-Lo, Target, Kmart and Officeworks, owned by Wesfarmers), rather than having to wade through all the individual statements. Corporate fraud here seems mostly do with with lying about what entities you really control and whether they gave you money.
Vocabulary!
Most exciting trivia for today (for me) was the explanation of why when you buy a ticket, you then have to give it to a second person who accepts/tears it off/stamps you etc. It’s never crossed my mind to wonder why we do something so inefficient before. It does make sense when you do it to introduce a ‘separation of responsibility’ step so that a cashier can’t just take payment for 100 tickets, let 100 people in, report 50 and wander off with half the profit.
Separate receiving cash, paying cash and reporting on what happened if possible.
What do you get from a Cash Flow Statement?
There is a really good diagram in the text about this that breaks it up into three streams (although some things can go in more than one stream depending on how you choose to classify them)
Cash Flow Statement records stuff you actually have, Statement of Comprehensive Incomes records stuff you owe / stuff people owe you so the balances will be different.
Break to snack and comb my hair, feels like I'm living in a giant spider web some days.
Huge amount of material on whether to add or subtract things on the balance sheet with lots of worked examples which was very logical but hurts my brain.
This entry was originally posted at http://samvara.dreamwidth.org/459654.html, where there are
comments.
Vocabulary!
- Economic entity: ‘group’ account.
- Parent entity: top of the food chain
- Controlled entity (aka subsidiaries): further down the food chain
- Inter-entity transactions: sales, loans, services between members of a group - removed from consolidated report
- Non-controlling interest (aka minority interest):
Most exciting trivia for today (for me) was the explanation of why when you buy a ticket, you then have to give it to a second person who accepts/tears it off/stamps you etc. It’s never crossed my mind to wonder why we do something so inefficient before. It does make sense when you do it to introduce a ‘separation of responsibility’ step so that a cashier can’t just take payment for 100 tickets, let 100 people in, report 50 and wander off with half the profit.
Separate receiving cash, paying cash and reporting on what happened if possible.
What do you get from a Cash Flow Statement?
- How much cash was generated and where did it come from?
- How much cash was used and where did it go?
- How much cash does entity have at year end?
- How did you get cash to pay off non-current liabilities and get new non-current assets?
- If there was a loss, how was entity able to pay for non-current assets?
- If entity sold shares, what was the cash used for?
- If entity report profit, why has cash position decreased?
- Notes and coins
- Deposits in banks
- Assets that can be converted to cash within 3 months
- Borrowings - bank overdrafts, money market funds
There is a really good diagram in the text about this that breaks it up into three streams (although some things can go in more than one stream depending on how you choose to classify them)
- Operating activities: day-by-day activities
- Investing activities: buying and selling of long term assets
- Financial activities: shares, loans and payouts
Cash Flow Statement records stuff you actually have, Statement of Comprehensive Incomes records stuff you owe / stuff people owe you so the balances will be different.
Break to snack and comb my hair, feels like I'm living in a giant spider web some days.
Huge amount of material on whether to add or subtract things on the balance sheet with lots of worked examples which was very logical but hurts my brain.
This entry was originally posted at http://samvara.dreamwidth.org/459654.html, where there are
comments.