Income Statement vs. Cash Flow Statement

Basically, "The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions.” They was accompanied by a management discussion and analysis. Such as balance sheet, income statement, statement of retained earnings and cash flow statement. Though we have income statement and cash flow statement, we don’t know what’s the difference between income statement and cash flow statement, and when to use these two type of analysis. Therefore, learning how to distinguish income statement and cash flow statement is very significant for us.

Income Statement:
It reports the sales or proceeds of a period, the reasonable cost of the goods sold, and the profit (net income) remaining after the cost. It also known as profit and loss statements (statement of profit and loss).

Cash Flow Statement:
It reports on a company’s cash flow activities. It gives information about the cash receipts, cash payments, and net change in cash that results from operating, investing, and financing activities during a period.

Difference between income statement and cash flow statement:

Meaning: 

Income statement: It is used to show the revenue, expenses, gains and losses for a particular accounting period. It can show profit, but it doesn’t show the amount of cash that was generated by operations.

Cash flow statement: It is used to reflect the ingoing and outflows of cash for a particular accounting period.

Basis: 

Income statement: Accrual

Cash flow statement: Cash

Objective:

Income statement: To know the owner’s equity and the profitability.

Cash flow statement: To help creditors, investors, and others evaluate the following aspects of the company’s financial position.

The major difference between income statements and cash flow statements is cash. Depreciation is considered in the income statement, yet isn’t considered in the cash flow statement. The former can be divided into two activities, and the other can be divided into three activities.

In conclusion, the two statement are used by the stakeholders. These statements are also used for the purpose of internal and tax audit.

Why do I need income statement and cash flow statement?

Income statement and cash flow statement stand for different yet related information, and the picture of your company is incomplete without understanding both.

Reference:

https://en.wikipedia.org/wiki/Financial_statement

https://wellsfargoworks.com/start/article/understanding-income-statements-and-cash-flow-statements

Mobile payment vs. Cash vs. Credit card

With the development of technology, more and more people decide to use mobile payment to pay the bill instead of cash and credit card. In fact, they have their own advantages and disadvantages. As consumers, they have their different choice.


Mobile payment 

It’s a way of  allowing users to use their mobile terminals to pay for the goods or services they consume. It can be divided into two types of ways, one is near-field payment, the other is long-distance payment. The former one is the way to use mobile phone to tap the machine when you buy something. The other one is by sending payment instructions, such as online banking, telephone banking, mobile payment, etc. Or by means of payment tools, such as by mail, remittance for payment.

Advantages:

Mobility: When you forget to take your debit card, cash or credit card out, it’s convenient for you to use this way to pay something. It can eliminate the distance and geographical restrictions. It combines with the mobility of advanced mobile communication technology, anytime, anywhere access to the required services, applications, information and entertainment.

Timeliness: Free from time and place restrictions, access to information more timely, the users can at any time for the account inquires, transfer or shopping consumption.

Disadvantages:

Sometimes, there are too many mobile payment tools make consumers confused. In addition to Apple Pay, there are many different mobile payment methods, such as Flint, Square, PayPal Here and PayWave, as well as banks to provide solutions, adding to the confusion. On the other hand, it’s easy to virus infection and let someone steals important information from your mobile phone. It can cause fraudulent phone.

Cash

It refers to the exchange medium that can be put into circulation immediately.

Advantages: 

It’s acceptable and can be used immediately to buy goods. It’s easy to pay when you buy something.

Disadvantages:

It is very dangerous and inconvenient to carry a lot of cash on hand.

Credit card

Known as “plastic money”, are being offered on very good terms to encourage the change. Consumers will be able to “buy now, pay later”, and many see this as an advantage. Banks and other financial institutions are encouraging their customers to use credit card to buy things. Meanwhile, there are many disadvantages associated with credit cards. 

Advantages: 

Using credit card cleverly then it’s possible to borrow for no cost, get extra protection on your purchases and even earn rewards for spending on your card.

Disadvantages: 

Some people find it very easy to exceed their budget. They are tempted to purchase goods that they do not really need, and can become quickly overburdened by debt. The credit cards often charge a high rate of interest.

http://www.moneysupermarket.com/credit-cards/advantages-and-disadvantages/

Depreciation

       Most of people need cars to work or travel, they purchase them with the exception that the value of cars will rise over time. However, you may realize, not like the case of homes, these expensive purchases will decrease all the time because of cars’ age, model, and distance of travel. Therefore, this is depreciation, the value of automobile goes down as time goes by due to usage. In order to help you calculate the depreciation, there are three various methods I list, such as Straight-line, units of production and Double-declinig Balance. 


Straight-line depreciation method

It is the simplest method, it charges an equal amount of depreciation to each accounting period. The formula to calculate depreciation has two steps: 
(1) Cost minus Residual value is equal Depreciable Amount. (2) The depreciable amount is divided by the asset’s useful life to calculate the annual depreciation expense.

Units-of-production method 
It is used to calculate the depreciation of wasting assets. It assigns an equal of expense to each unit produced or service by the asset. It’s ideal for equipment whose activity can be measured in units of output, such as kilometers driven or hours in use. 

The formula to calculate depreciation has three steps: (1) Is the same as straight-line’s first step. (2) Depreciable amount is divided by Total estimated units of production is equal depreciable amount per unit. (3) Depreciable amount per unit * units of production during the year is equal annual depreciation expense. 
The formula involves using historical costs and estimated salvage values and then determining the expense for the accounting period, multiplied by the number of units produced. It’s easy to apply when assets are purchased during the year.

Double-dealing balance
It is a type of accelerated depreciation method that calculates a higher depreciation charge in the first year of an asset’s life and gradually decreases depreciation expense in the subsequent years. 
No matter the age of your car, insurance will be a concern. Rates will almost always be lower for used cars than new cars, but regardless, keeping coverage costs low is a good savings strategy. The best way to do that is to keep your car insurance search as efficient as possible. 
  
         If you don’t know how to calculate depreciation, so you can compare the three different ways I have listed above. In fact, thought your can will be depreciated, it doesn't mean you can't buy car. Therefore, you should accept the vale of car will be lower and lower as time goes by.
Reference:

https://www.trustedchoice.com/insurance-articles/wheels-wings-motors/car-depreciation/

http://www.investopedia.com/ask/answers/021815/what-are-different-ways-calculate-depreciation.asp

Sole proprietorship vs. partnership vs. corporation

A sole proprietorship is a business that has only one owner who is responsible for making decisions for the company. A partnership consists of two or more people who share the responsibility of managing the company. It has two special types of partnerships, such as Limited Partnership (LP), and Limited Liability Partnership (LLP). A corporation is a business that is owned by shareholders. It has one or more owners may participate as shareholders of a corporation.

• A Sole Proprietorship’s advantages

Then owner is in business for themselves, all of the profit belong to the owner, if the company make money. All of the income and expenses should be belonged to the owner, who is responsible for his/ her own company.

• A Sole Proprietorship’s disadvantages:

It has some risky, because if the company is going to bankrupt, the owner should be responsible for all things. Everything may lose.

Partnership: Two or more people share in the ownership and operation of a business.

• A Partnership’s advantages: 

It’s easy to form, making decision- making easier and fewer government regulations and restrictions than corporations.

• A Partnership’s disadvantages:

If the company is going to bankrupt, each partner should be responsible for company, because partnership has unlimited liability. Mutual agency and limited life. Eg. Fogle, Silver, & Zimmerman

A corporation can be divided into two parts, such as public corporation and private corporation. Public corporation must follow IFRS, yet the private corporation can choose to follow either IFRS or ASPE. By law, the business has its own identity. Eg. Walmart Corporation

Ex：Walmart is an American multinational retailing corporation that operates as a chain of hypermarkets, discount department stores, and grocery stores. Headquartered in Bentonville, Arkansas, the company was founded by Sam Walton in 1962 and incorporated on October 31, 1969. Walmart is the world's largest company by revenue, according to the Fortune Global 500 list in 2016, as well as the largest private employer in the world with 2.3 million employees. It is a family-owned business, as the company is controlled by the Walton family.

https://en.wikipedia.org/wiki/walmart



 
https://www.brainyquote.com/quotes/keywords/partnerships.html