Accounting / July 17, 2018 / Pearl Bailey
A cash flow statement, also referred to as a statement of cash flows, shows the flow of funds to and from a business, organization, or individual. It is often prepared using the indirect method of accounting to calculate net cash flows. The statement is useful for analyzing business performance, making projections about future cash flows, influencing business planning, and informing important decisions. The term "cash" refers to both income and expenditures and may include investments and assets that you can easily convert to cash. By conducting a cash flow analysis, a business can evaluate its liquidity and solvency, compare performance among accounting periods, identify cash flow drivers to support growth, and plan ahead to maintain a positive cash position.
Tenants who lease commercial properties sign various types of leases structured to put more responsibility on the tenant and provide greater up-front profit for the landlord. For example, some commercial leases require the tenant to pay rent plus the landlord's operational costs, while others require tenants to pay rent plus property taxes and insurance. The four common types of commercial real estate leases include: single-net leases, in which the tenant is responsible for paying property taxes; double-net leases, which make a tenant responsible for property taxes and insurance; triple-net leases, where tenants must pay property taxes, insurance and maintenance; and gross leases, in which the tenant pays rent while the landlord is responsible for other costs.
The legal form of a capital lease is that the business never owns the asset, however because under a capital lease the rights and risks of ownership are transferred to the business, for accounting purposes the substance of the agreement is reflected and the asset is treated like any other asset, as if it had been purchased by the business.
Asset retirement obligation involves the retirement of a tangible, long-lived asset that depends on a future event beyond the control an obligated party. It is an accounting rule and legal obligation meant to account for the cost of returning a piece of property to its original condition. Asset retirement obligation (ARO) is an essential part of producing fair and accurate financial statements so those viewing them can have a better idea of a company's obligations, and therefore its overall value.
In Case You Missed It