Question

Explain the three basic component of useful information.
Write down the basic accounting records maintained in a payroll system.

Answer 1

Answer:

The three basic component of useful information are given bellow

Explanation:

Income statement:

The income statement lists all your business income and expense transactions. It is also known as a profit and loss statement. This type of accounting record is used to measure the profitability of your business. Income statements can be generated for any specific business period, and are commonly prepared on a daily, monthly, quarterly or annual basis. Analyzing income statement trends allows you to determine if there are periods when your business incurs more expenses or generates additional income, so you can plan for budget shortfalls or surpluses.

Balance sheet:

The balance sheet records the assets and liabilities your company owns. Your assets and liabilities are divided into current and long-term categories on the balance sheet, and listed in order of liquidity. Current accounts are expected to be consumed or paid within a year, and long-term account balances will take longer than one year to consume or be paid. The most liquid assets are listed first on the balance sheet, and include cash and accounts-receivable balances. Owner’s equity is also shown on the balance sheet. The combination of these items allows investors and lenders to analyze the potential financial position of the business.

Statement of cash flows:

The statement of cash flows records the inflow and outflow of cash. This differs from the income statement, as an income statement may contain information for earned income that customers have not yet paid, and accrued expenses that your business has not paid yet. The cash flow statement only shows transactions that have actually been monetarily completed for operating, investing and financing activities. This record is used to determine if your business has physically received enough cash to pay its expenses.