1. Why do we have accountants?

2. What about cash flow?

3. A whirlwind tour of accounting

4. An example

5. Summary

Summary

Although this is just one transaction, all companies are, is a large number of transactions undertaken by the same entity.

The above example, also neatly illustrates the dangers of overtrading and the importance of cashflow, because it isn't until the end of the process, when money is received from customers, that cashflow turns positive. Until then the negative cashflow must be financed from elsewhere - either borrowings or reserves.

 

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