Understanding Accounts

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Understand the basics.

It's not just accountancy specialists who deal with spreadsheets, and figures, and the financial side of business. It's highly likely that, as a line manager or department head, you're going to have to analyze a spreadsheet at some point, or have some form of financial recording to do as part of your job description.

However, if you feel baffled by balance sheets, or confused by cash flow statements, then read on. This article will take you through the basics of finance for non-financial managers, to help you become familiar with the terminology – and what it all means.

Financial management is a crucial aspect of any thriving business. Profit maximization, or stockholder wealth maximization, are two real concerns for any organization – and they depend on solid financial decisions. To make good decisions, management needs good information. And that information comes from the accounting system.

From the accounting system come the financial statements. These statements contain important information about the organization's operating results. This information is important for effective management, and financial control. As a manager, or any other person with financial responsibility, you have to be able to interpret this information yourself.

Financial statements contain important information about your company's operating results and financial position. The relationship between certain items of financial data can be used to identify areas where your firm excels and, more importantly, where there are opportunities for improvement. Using, understanding, and interpreting these statements will help you make much better business decisions.

The Basic Financial Statements

Businesses record their performance in standard formats called financial statements. The most common of these are:...