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02 Transcript - Financial Statement

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6 views

02 Transcript - Financial Statement

Uploaded by

gergirarf2003
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Transcript: Financial Statement

So what is financial statement? Financial statement is a report that presents financial information to
the users. What kind of information that financial statement provides? It provides information about
assets, liabilities, owner's equities, revenue and expenses. From these basic information there are
additional financial statements produced by preparers. According to accounting standard, there are
five financial statements that are produced by the preparers. Number one, a statement of financial
position or well known as balance sheet. Number two, profit and loss or statement of income. Three,
cash flow statements four, statement of changes in equity and number five is notes to the accounts.

What is the purpose of each of the financial statements? Balance sheet provides information on
assets, liabilities and owners equities. It provides statement of affairs of the business. From balance
sheet you will know about what is the resources owned by the organisation or what we call as assets.

What is the obligation of the organisation liabilities and what is the claim by the owners to the business
or owner's equity. Statement number two is profit and loss. Profit and loss provides information about
performance of the business. Performance throughout the year where the statement provides
information on revenue and expenses. Statement number three is a cash flow statement. Cash Flow
statement provides information about cash movement in a business. Due to accrual basis that we
adopt, then we prepare balance sheet and profit and loss. Information presented in these two
statements did not provide information about cash movement in a business. Therefore, the third
statement is important for us to understand the cash movement in a business. The cash flow
statement is divided into three important segments. One operating activities, two investing activities,
three financing activities.

These three important activities describe about three major transactions in a business. Operating
activities are activities related to the objective of an entity. Investing activities are activities related to
assets of the organisation and financial activities are activities related to the financing or funding of a
Business money coming in or money going out to the liabilities as well as the equities. The fourth
financial statement are statements of changes in equity. This statement provides movement in equity
of an entity or a business. Equity refers to shares and reserve. Shares are ordinary shares issued by
institution and subscribe by the owner and reserve refers to excess made by a business like profit
made during the year and include the accumulated profit from prior years as well as other business
transactions related to reserve like asset revaluation and the like. Statement number five is notes to
the accounts. Notes to the accounts are details about information that we provide in statement
number one, balance sheet or statement of financial position. Statement number two, profit and loss
or statement of income. Statement number three, cash flow. Statement number four, statement of
changes in equity.

Therefore, notes to the account provide details about accounting policy, about reporting strategy,
about detailed information of transaction disclosed in the four financial statement I mentioned earlier.

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