Financial Statement
Financial Statement
Prayer
Terminologies
Financial statements- are used by investors, market analysts,
and creditors to evaluate a company's financial health and
earnings potential. The three major financial statement reports
are the balance sheet, income statement, and statement of cash
flows.
Liquidity refers to the company’s
ability to pay maturing obligation.
Accounting Equation:
ASSETS = LIABILITIES+OWNER’S
STATEMENT OF
FINANCIAL POSITION OR
BALANCE SHEET
This financial report provides information
regarding the liquidity position and capital
structure of the company as of a given date.
Two types of SFP or
balance sheet
Report Form- traditional form of statement
of financial position which consist of one
column.
Account Form- two columns with assets on
the left side and liabilites and owners equity
on the right side.
Report Form
Account Form
Current Assets
readily convertible into cash
ex: cash,accounts receivables
Non-Current Assets
assets that cannot be convertible to
cash. ex: Property, equipment
Current Liabilities
liabilities that fall due within one
year from the reporting date.
ex: Accounts, payable,
expense,unearned income.
Non-Current Liabilities
Upon closing:
- If the revenues exceed expenses during an
accounting period, retained earnings will
increase.
- The reverse is true which means that if the
expenses exceed revenues, the retained
earnings will decrease.
8. Making the closing entries