2 Essay Example | Topics and Well Written Essays - 1000 words - 3

2 - Essay Exampleequal to capital and liabilities because when a person or an entity start their business, they inject the capital which can be in form of specie or other assets therefore at the beginning of the entity all there is atomic number 18 assets and capital. When the company expands it purchases goods or offers services which give vacate to further assets and further liabilities as loans are acquired and credit is obtained out of that same capital.Some amount is also generated as profit for their business. Therefore, all the transactions of the entity exhaust place through the same capital and the assets of the company must always equal their liabilities and capital.The statement of financial position gives the position of the company at a given moment of time where it provides the description of companys assets, liabilities and equity from its establishment to that particular date, while the Income statement provides the details of all the income and expenditure activi ties during the category as at the date of balance sheet.In a nut shell, the financial position is the standing at that date while the Income statement is the elbow grease during the period which is why the dates begin with as at and year ended respectively.The figure of net cash flow will mostly be distinct from that of net profit because the cash flows of the company are purely due to the monetary items such as sale, purchase, monetary income of dividend and interest, monetary expenses of salaries and rent etc.These expenses are purely of monetary nature while the net profits of the company not only involve these monetary items but also involve non cash items such as depreciation, fair value, amortization etc therefore normally cash and cash equivalents of the company are usually not equal to their net profit. genuine expenses are not affected by the cash flows of the company as it does not involve cash dealing on the time of the transaction. These expenses or income do not aff ect the cash flows because