Guide To Sustainable Business Networks

When it comes to sustainable business networks, financial statements have two basic functions. They provide information on the economic situation of the company and provides the basis for the distribution of earnings.

Documentation of the net assets, financial position and earnings of the reporting date is the basis for future planning and decisions of the company, the shareholders and external groups. The result of the financial statements will be used by banks and other creditors as a criterion for awarding credit and may be used as evidence in any legal dispute.

The financial statements are the basis for taxation of the company and for the determination of performance-based payments such as dividends and bonuses.

The commercial basis for the preparation of financial statements mainly include the generally accepted accounting principles and must also respect international accounting standards. The two most important rules are the International Financial Reporting Standards (IFRS) and the United States Generally Accepted Accounting Principles (U.S. GAAP) for companies that are active in the U.S. market.

This framework of rules are configured by more specific laws and regulations. Notably the existence of the Public Disclosure Act, which defines the publication of the accounts of certain companies, as well as tax provisions, such as the Income Tax Act. Also, for certain industries, there are special rules.

The most important preliminary work is listed as follows: The inventory determines the actual amount of the assets and debts. The stocks included in the inventory are valued according to generally accepted accounting principles and differences between the desired and actual stock.

Identifying and booking of impairment of fixed assets, depreciation flow over the useful life of the individual asset items in the financial statements. Where applicable, amortization is required on the current assets.

Claims must be reviewed and evaluated on their credit rating. Identifiable risks of bad debts are taken into account by the posting of specific and general allowances. The accrual-based income calculation is ensured by the temporal and deferred provisions.

Preliminary closing entries must include the setting of statutory or voluntary reserves. In addition to the steps mentioned numerous other corrections may be necessary. These would include the definition of the private business sector or the thematic breakdown of non-operating income and expenses (sustainable business networks).

Business cycles or cyclical fluctuations in economic activity are recurring variations in the economy with which an expansion phase is followed by a contraction and so on. The resulting contraction generates an economic crisis that negatively affects the livelihood of millions of people.

Cycles are specific phenomena of economies based on money and business, in which economic activity is organized by companies looking to maximize their profits. Everything that affects the economy from the rains to politics.

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