A local west Chicago CPA firm explains basic accounting principles:
Financial reporting should provide information about how enterprise obtains and spends cash, about us borrowing repayment of borrowing, about capital transactions, including cash dividends and other distributions of enterprise resources to owners, and about other factors that may affect and enterprises liquidity or solvency.
For example, although reports of enterprises cash receipts and cash outlays during a period or generally less useful than earnings information for measuring enterprise performance during a period in for assessing enterprise's ability to generate favorable cash flows, information about cash flow's or other funds flows maybe useful in understanding the operations of an enterprise and evaluating its financial activities.
According to our accountants and top CPAs in Chicago, information about earnings and economic resources, obligations, and owners equity may also be useful in assessing enterprises liquidity or solvency. However, hope the concept of earning power in the techniques for estimating it are part of financial analysis and I'll be on the scope of basic CPA financial reporting.
