This document provides an overview of key financial statements and their components:
1. The Statement of Financial Position (balance sheet) shows a company's assets, liabilities, and equity at a point in time. It classifies assets and liabilities as current or non-current.
2. The Statement of Profit or Loss and Other Comprehensive Income (income statement) shows a company's revenues, expenses, and profits/losses over a period of time. Expenses can be classified by nature or function.
3. The Statement of Cash Flows provides information on a company's cash inflows and outflows from operating, investing, and financing activities during a period.
This document provides an overview of key financial statements and their components:
1. The Statement of Financial Position (balance sheet) shows a company's assets, liabilities, and equity at a point in time. It classifies assets and liabilities as current or non-current.
2. The Statement of Profit or Loss and Other Comprehensive Income (income statement) shows a company's revenues, expenses, and profits/losses over a period of time. Expenses can be classified by nature or function.
3. The Statement of Cash Flows provides information on a company's cash inflows and outflows from operating, investing, and financing activities during a period.
This document provides an overview of key financial statements and their components:
1. The Statement of Financial Position (balance sheet) shows a company's assets, liabilities, and equity at a point in time. It classifies assets and liabilities as current or non-current.
2. The Statement of Profit or Loss and Other Comprehensive Income (income statement) shows a company's revenues, expenses, and profits/losses over a period of time. Expenses can be classified by nature or function.
3. The Statement of Cash Flows provides information on a company's cash inflows and outflows from operating, investing, and financing activities during a period.
This document provides an overview of key financial statements and their components:
1. The Statement of Financial Position (balance sheet) shows a company's assets, liabilities, and equity at a point in time. It classifies assets and liabilities as current or non-current.
2. The Statement of Profit or Loss and Other Comprehensive Income (income statement) shows a company's revenues, expenses, and profits/losses over a period of time. Expenses can be classified by nature or function.
3. The Statement of Cash Flows provides information on a company's cash inflows and outflows from operating, investing, and financing activities during a period.
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FABM 2 - Present obligations resulted from past
events and require you to give up
CHAPTER 1 resources when settling them Types of Financial Statement c. Equity (galling sa sarili mo) - Assets minus Liabilities (Product of an accountant) - “capital” and ”net worth/assets” 1. Statement of Financial Position - Residual interest - Also called “balance sheet” or Presentation of Statement of Financial Position “statement of condition” - Provides Current status or information a. Classified (current/non-current distinction) on the entity’s assets, liabilities, and - Shows information on current and equity noncurrent assets and liabilities 2. Statement of Profit or Loss and other b. Unclassified(based on liquidity*) comprehensive income - Does not show distinction between - Income statement current and noncurrent assets and - Provides information on income and liabilities expenses *easily convertible to cash 😊 - INCOME – EXPENSES = NET INCOME/ LOSS Current and Noncurrent Assets 3. Statement of Changes in equity - Assets are classified as current when - Provides information on the movements they are expected to be realized within in the components of equity during the 12 months from the end of the reporting period period or depending on the normal - Beginning Capital + additional operating cycle. All other assets are investments = Total – Withdrawals classified as noncurrent. “Realized” =Balance +/- Net Income/ Loss = Ending means converted into cash or claim for Capital cash. 4. Statement of Cash flows - Provides information on how cash and cash equivalents were generated and used during the period - Cash inflow (cash receipts) and outflow (cash payments) 5. Notes - provides narrative disclosures and other information required by the standards but were not presented in the other Note that: financial statements Inventory is only for merchandising business Elements of the Statement of Financial Position Prepaid Expense is also an asset a. Assets (lahat ng pagmamay-ari mo) Current and Noncurrent Liabilities - Resources you control (entitled to possession) - Liabilities are classified as current when - Resulted from past events they are expected to be settled within 12 - Provide you with future economic months from the end of the reporting benefits period or depending on the normal b. Liabilities (galling sa ibang tao) operating cycle. All other liabilities are classified as noncurrent. Line items - Accounts are presented in the financial statements using “line items.” A line item is a caption used to describe a group of accounts with similar nature. - Examples of line items in the balance Trade and Nontrade receivables sheet: - Trade receivables are receivables arising a. Cash and cash equivalents from the sale of goods or services in the b. Trade and other receivables ordinary course of business. All other c. Inventory receivables are nontrade. d. Property, plant and equipment - Trade receivables are presented as Forms of balance sheet current assets if they are collectible within the normal operating cycle, even if the normal operating cycle is longer than 12 months. - Nontrade receivables are presented as current assets only if they are collectible within 12 months from the end of reporting period. Notes to add: usual form of balance sheet is report form Normal Operating Cycle 2 types of Cash: On hand and In Bank - The normal operating cycle of an entity is the time between the acquisition of Interim – short term period assets for processing and their realization in cash. Calendar – 1 year from Jan 1 - When the entity’s normal operating Fiscal – 1 year from any of the 12 months cycle is not clearly identifiable, it is assumed to be 12 months. CHAPTER 2
Trade and Nontrade payables Statement of Comprehensive Income
- Trade payables are obligations arising Income statement vs. Statement of
from purchases of inventory that are sold comprehensive income in the ordinary course of business. All other payables are nontrade. - Trade payables are presented as current liabilities if they are payable within the normal operating cycle, even if the normal operating cycle is longer than 12 months. Single-statement vs. Two-statement presentation - Nontrade payables are presented as current liabilities only if they are payable within 12 months from the end of reporting period. Presentation of Expenses a. Nature of expense method (single-step)
Elements of the Statement of Comprehensive
Income b. Function of expense method (Cost of sales • INCOME – are increases in economic method or Multi-Step) benefits during the period in the form of Major categories of expenses under the inflows or enhancements of assets or function of expense method decreases of liabilities that result in increases in equity, other than those relating a. Cost of sales (or Cost of goods sold) to investments by the business owners. Income includes both revenue and gains. b. Distribution costs (or Selling expenses)
• EXPENSES – are decreases in economic c. Administrative expenses (or General and
benefits during the period in the form of administrative expenses) outflows or depletions of assets or increases d. Other expenses of liabilities that result in decreases in equity, other than those relating to e. Interest expenses (or Finance cost) distributions to the business owners. f. Income tax expense Expenses include both expenses and losses. • The difference between income and expense represents profit or loss. If income is greater than expenses, the difference is profit. If income is less than expenses, the difference is loss. CHAPTER 4 Statement of Cash flows Presentation of Statement of Cash Flows • Cash inflows and outflows are presented in the statement of cash flows according to the activities in which they have been generated or utilized, as follows: 1. Operating activities (transactions affecting Income and Expenses) 2. Investing activities (Owner’s Capital) Notes to add: 3. Financing activities (Long term asset 2 types of Transportation Expenses: Freight In and or PPE) Out Royalties- kita sa literary works CHAPTER 3 Statement of Changes in Equity Examples of Operating activities Transactions that cause changes in equity a. Cash receipts from the sale of goods and the rendering of services. b. Cash receipts from interest income. c. Cash payments for purchases of inventory. d. Cash payments for expenses. Examples of Investing activities
Solo proprietorship a. Cash payments for the acquisition of
property, plant and equipment. - 1 person b. Cash receipts from sales of property, plant Partnership and equipment. - More than 2 Examples of Financing activities Corporation a. Cash receipts from investments of owner - Share capital to the business.
Cooperative b. Cash payments on drawings by owner.
- Nonprofit organization c. Cash receipts on loans.
d. Repayment of loans. Reporting cash flows from Operating activities • Cash flows from operating activities may be presented using either: a. Direct method
b. Indirect method
Guidelines: Indirect Method
ADDITIONAL IN CHAPTER 1 ADDITIONAL IN CHAPTER 2 Financial Statements SOCI shows the ff - Accounting info is communicated 1. Profit or loss through this 2. Other comprehensive income - Purpose of accounting is to provide info 3. Comprehensive income that is useful for making economic Revenue decisions - Structured representation of an entity’s* - Arises in the course of ordinary activities a. Financial position - Revenue earned by a service business is - Resources that are controlled by entity called “service fees” and how the resources are generated - Revenue earned by a merchandising b. Results of its operation business is called “sales” - How well the entity performed Gains *entity refers to reporting entity which is the one whose financial statements are being prepared - May or may not arise in the course of the ordinary activities of an entity Information about financial position is provided by SOFP Expenses
Information on results of operation is provided by - arise in the course of the ordinary
the other components of financial statements : activities of business
1. Info about financial performance is provided Loss
by the SOPLOCI - may or may not arise in the course of 2. Info about changes in financial position is ordinary activities of an entity provided by the SOCE and SOCF ADDITIONALS IN CHAPTER 3 Elements of Financial Statements Sole proprietorship 1. Assets 2. Liabilities - Equity only has one entry (Mr. A’s 3. Equity Capital) 4. Income - Registered with DTI 5. Expenses Partnership Obligating event - Formed by contractual agreement a. A legal obligation - Registered with SEC - Equity has many entries depending on Legal obligation arises from the number of partners (Mr. A’s , Mr. a. A contract B’s, Mr. Lance’s Capital) b. Law Corporation c. Other operation of law b. Constructive obligation - Stockholders - Arises from your past business practices - Formed by operation of law or published policies - Registered With SEC - Equity has entries like share capital, retained earnings, other components of equity Cooperative - Members - Formed in accordance with the cooperative code - Registered with CDA - Equity has entries like share capital, donations and grants, statutory funds GOODLAK MAH PRENDS DE PARIN KAYO MAHAL NG CRUSH NIYO SAME LANG TAYO HAHAHAHAHAHAHAHAHAHAHAHAHAHA