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Financial Statement

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15 views35 pages

Financial Statement

Uploaded by

sunshinemayo101620
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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FINANCIAL

STATEMENTS
WHAT ARE FINANCIAL STATEMENTS?

Financial statements are structured


representation of the entity’s financial
position, financial performance, and cash
flows of an entity that is useful to a wide
range of users in making economic
decisions
FINANCIAL STATEMENTS

Financial reports prepared periodically to


inform the owner, creditors, and other
interested parties as to the financial
condition and operating results of the
business
FINANCIAL STATEMENTS

It provide the users and other interested


parties with useful information that may
affect the decisions they are confronted
with
FINANCIAL STATEMENTS

01 STATEMENT OF
STATEMENT OF 02 STATEMENT OF
FINANCIAL
FINANCIAL COMPREHENSIVE
POSITION
POSITION INCOME

03 STATEMENT OF
STATEMENT OF 04 STATEMENT OF
STATEMENT OF
CHANGES IN
CHANGES IN
CASH FLOWS
CASH FLOWS
EQUITY
EQUITY
INCOME STATEMENT
Presents the entity’s revenues
and expenses during an
accounting period that tells
users on whether the entity
enjoyed profit or suffered a loss
during the period
It is the operating results of a
business for a specific period of
Statement of time, usually a moth, a quarter,
Performance or a year. The components of an
income statement are revenues
(Income and expenses to determine net
income or net loss.
Statement)
If revenue is larger than
Revenue-Expenses
Revenue-Expenses =
= Net
Net Income
Income expense the result is net
or
or Net
Net Loss
Loss income
If revenue is lesser than
expense, it is net loss
CAPITAL STATEMENT
Presents the changes in the
equity of the owner due to
investments, additional
contributions,net income or loss,
and personal withdrawals
Financial statement that
summarizes all the changes in
owner’s equity that occurred
Statement of during a specific period (month
or a year)
Equity
It is the bridge between the
(Capital income statement and balance
sheet. It uses net income/loss
Statement) from income statement in
addition to owner’s drawing as
derived from the ledger to
determine Owner’s Capital
balance
Major Components

Owner’s Beginning
Owner’s Beginning
Net
Net Income/Net
Income/Net Loss
Loss
Capital
Capital
The capital balance at Contains final calculation of
profit and loss as
the beginning of the derived from the income
period statement
Major Components

Drawings
Drawings Capital
Capital Balance
Balance
Contains the owner’s
Final calculation of the
total drawings as
capital balance at the
derived from the trial end of the period
balance
STATEMENT OF
FINANCIAL POSITION
(BALANCE SHEET)
Presents the entity’s asset’s
liabilities and capital as of the
period
Key Elements

Assets – properties used in the operation or investment


activities of a business

Liabilities – claims by creditors to the assets of a


business until they are paid

Owner’s Equity (Capital) – the owner’s rights or claims


to the assets of the business
STATEMENT OF
CASH FLOWS
Presents the entity’s cash
inflows and outflows on three
major activities: operating,
investing, and financing
Operating Activities
include cash activities related to net income.
For example, cash generated from the
rendering of services and cash paid for
expenses are operating activities because
revenues and expenses are included in net
income
Investing Activities

include cash activities related to non-current


assets. Non-current assets include long-
term investments and property, plant, and
equipment
Financing Activities

comes from conducting financing activities for


the business. In other words, financing cash
flow includes obtaining or repaying capital,
be it equity or long-term debt
Qualitative
Qualitative Characteristics
Characteristics of
of Financial
Financial
Statements
Statements

Fundamental
Fundamental Enhancing
- Understandable
- Relevant - Comparable
- Reliable - Verifiable
- Timeliness
Fundamental

Make financial accounting


information useful to
users
Relevant
Information must not only
timely but should also
possess feedback value
and/or predictive value
for it to be effective in
business decisions
Feedback Value – refers to
information about what has
happened in the future
Predictive Value – refers to
information that will help
guide the user in predicting
what will occur in the future
Reliable
The information must be
complete, free from
material error, neutral
and unbiased, faithfully
represents the
information contained
therein
Enhancing

Enhance the usefulness


of financial information
Verifiable – majority of
independent experts agrees
Timeliness – information
available to decision makers in
time
Understandable – information
must be comprehensible. Data
can be understood by any
users. Terminologies used
must be adapted to the user’s
range of understanding
Comparable – financial reports should be
consistent, which means that the procedures
and methods used in preparing the report
should remain unchanged from period to
period.Allows users to compare fs of different
entities (businesses) or to compare the same
entity over different periods.

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