A complex piece of financial information can be confusing to read due to the complexity. Visuals like charts and graphs can make it easier to understand complex financial data. Similarly, explaining the balance sheet or income statement line by line can also help to make numbers more understandable. Also, it is crucial to explain how the changes made in one account affects other items like cash and liabilities.
If a business spends money on supplies, the available cash will be reduced and the Accounts payable account increased. It is important to note that this decrease in cash directly affects future transactions as less money will become available. Therefore, it’s important to consider all possible effects of accounting transactions before they are recorded in order to ensure accurate reporting of financial data over time.