Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 486 views

    The Basic Financial Statements

    Uploaded by

    Park Chimmy
    Financial statements are formal reports prepared by accountants to show the financial effects of transactions grouped into elements. There are four basic financial statements: (1) the balance sheet shows the financial condition at a point in time with assets, liabilities, and equity; (2) the income statement shows operating performance over a period with revenues and expenses; (3) the statement of changes in equity shows movements in owner's equity over time; and (4) the cash flow statement explains changes in cash and cash equivalents during a period through operating, investing and financing activities. Notes to the statements provide additional context. The elements that make up the statements are assets, liabilities, equity, revenues and expenses.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    The Basic Financial Statements

    Uploaded by

    Park Chimmy
    486 views2 pages
    Financial statements are formal reports prepared by accountants to show the financial effects of transactions grouped into elements. There are four basic financial statements: (1) the balance sheet shows the financial condition at a point in time with assets, liabilities, and equity; (2) the income statement shows operating performance over a period with revenues and expenses; (3) the statement of changes in equity shows movements in owner's equity over time; and (4) the cash flow statement explains changes in cash and cash equivalents during a period through operating, investing and financing activities. Notes to the statements provide additional context. The elements that make up the statements are assets, liabilities, equity, revenues and expenses.

    Original Title

    THE-BASIC-FINANCIAL-STATEMENTS.docx

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Financial statements are formal reports prepared by accountants to show the financial effects of transactions grouped into elements. There are four basic financial statements: (1) the balance sheet shows the financial condition at a point in time with assets, liabilities, and equity; (2) the income statement shows operating performance over a period with revenues and expenses; (3) the statement of changes in equity shows movements in owner's equity over time; and (4) the cash flow statement explains changes in cash and cash equivalents during a period through operating, investing and financing activities. Notes to the statements provide additional context. The elements that make up the statements are assets, liabilities, equity, revenues and expenses.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    486 views2 pages

    The Basic Financial Statements

    Uploaded by

    Park Chimmy
    Financial statements are formal reports prepared by accountants to show the financial effects of transactions grouped into elements. There are four basic financial statements: (1) the balance sheet shows the financial condition at a point in time with assets, liabilities, and equity; (2) the income statement shows operating performance over a period with revenues and expenses; (3) the statement of changes in equity shows movements in owner's equity over time; and (4) the cash flow statement explains changes in cash and cash equivalents during a period through operating, investing and financing activities. Notes to the statements provide additional context. The elements that make up the statements are assets, liabilities, equity, revenues and expenses.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    THE BASIC FINANCIAL STATEMENTS

    Financial Statements are the formal reports prepared by accountants. These statements show the
    financial effects of transactions and other events that grouped into broad classes according to their
    economic characteristics. These broad classes are called elements of financial statements.

    Financial Statements are the following:


    1. Statement of Financial Position – also known as the Balance Sheet shows the financial
    condition of the business entity at any given time. This statement conveys information about the
    business entity’s liquidity, solvency, stability, capital structure, and financial flexibility. The
    accounting elements of the financial position are ASSETS, LIABILITIES, AND EQUITY.
    2. Statement of Comprehensive Income – is also known as the Income Statement. This accounting
    report shows the operating performance of the business entity for a given period. The
    accounting elements of this report are REVENUES AND EXPENSES.
    3. Statement of Changes in Equity – shows the movements in the various elements of the owner’s
    equity or capital for a certain period. The following are the basic components of this statement:
    a. Owner’s investments to the business.
    b. Profit or loss for the period.
    c. Owner’s personal withdrawals, and
    d. Prior period adjustments.
    4. Cash Flow Statement – The financial report explains the changes of cash and cash equivalents
    during an accounting period.
    A cash equivalent is a short-term, highly liquid investment that is easily convertible to cash.
    The components of a cash flow statement are classified into the following activities:
    a. Operating – the inflows and outflows of cash from the normal operating activities of the
    business.
    b. Investing – the inflow and outflow of cash from the sale or purchase of assets other than
    inventory.
    c. Financing – the inflows and outflows of cash from the owners and creditors of the enterprise.
    The components of the cash flow statement merely explain the sources and uses of cash. CASH is
    one of the components of the current assets in the Statement of Financial Position.
    5. Notes to the Financial Statements – The parenthetical disclosures and notes to the financial
    statements are considered part of the basic financial statements to achieve proper
    understanding of the financial reports.
    ELEMENTS of FINANCIAL STATEMENTS (FS)
    1. Assets – These are resources owned or controlled by an entity resulting from past events and
    from them, future economic benefits are expected to flow to the entity.
    2. Liabilities – These are existing obligations of the entity arising from past events; their
    settlements are expected to result in an outflow of assets from the entity.
    3. Equity – The residual interest in the assets of the entity after deducting all its liabilities.

    Note: The above elements are directly used to the measurement of financial position.

    4. Revenues – These are increases in assets or decreases in liabilities arising from business
    operation during an accounting period that result to increase in owners’ equity. These increases
    in assets are not contributions of owners and creditors.
    5. Expenses – These are decreases in assets or increases in liabilities arising from the business
    operations during an accounting period that result to the decrease in owner’s equity. These
    decreases in assets are not withdrawals or owners or payments of existing liabilities.

    Note: The above elements are used to measure operating performance or also called as Income
    Statement accounts.

    You might also like