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Accounting Notes Accounting (Special Edition) Notes

Introduction To Financial Statements Notes

Updated Introduction To Financial Statements Notes

Accounting (Special Edition) Notes

Accounting (Special Edition)

Approximately 126 pages

These notes are specially designed to meet the requirements of the accounting and financial reporting students internationally. These notes are equally relevant for all the regions of the world.

There are many easy and unique features included in the notes to understand and grasp the topic.

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There are many practice questions to understand how the concept is applied into practical scenarios.

These not...

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Introduction to Financial Statements

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Definition

Financial reporting is the announcement of financial operations of an entity to its investors & other stakeholders.

In other words

Financial statements are the overall performance of the business revealed in an arranged presentation.

Financial statements include:

  • Income statement or Statement of comprehensive income

  • Balance Sheet or Statement of financial position

  • Cash flow statement or Statement of cash flows

  • Statement of changes in equity (SOCE)

  • Notes to the financial statements

Why is it important?

The purpose of financial statements is to deliver information about the financial situation, financial running, and cash flows of an organization that is useful to a broad range of users in their monetary decisions.

Financial statements delivers information about an entity's assets, liabilities, capital, revenues and expenditures, inputs by and dividends to owners and the cash flows

The information in the financial statements are useful for users to make economic decisions like further investment, divestment, predicting future profits and financial health of the business etc.

Lecture Notes

The income statement is a statement that shows whether the company made profit or loss for the year. It shows total sales less all expenses for the year to find net profit or loss for the accounting period.

The balance sheet presents the financial condition of a business at a particular date. The balance sheet is made up of 3 segments: assets, liabilities and capital (equity).

  • Assets are the resources controlled by an entity from which future economic benefits flow towards an entity.

  • Liabilities are the obligations of the firm.

  • The difference between assets and liabilities is known as net assets. The net assets of the entity are also known as owners' equity OR capital

A cash flow statement also known as statement of cash flows, shows the change in cash and cash equivalents of a business under the category of operating, investing and financing activities.

The statement of changes in equity (SOCE) reports the detailed changes in capital (owners' equity) over the accounting period (e.g. one year)

Notes to the financial statement shows extra details which is not shown in above statements, It includes accompanying data such as divisional revenues, details about the long lived assets and their depreciation methods, policies etc. it also shows analysis and dissertation about the...

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