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Introduction To Financial Statements Notes

Accounting Notes > Accounting (Special Edition) Notes

This is an extract of our Introduction To Financial Statements document, which we sell as part of our Accounting (Special Edition) Notes collection written by the top tier of Acca students.

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Introduction to Financial Statements http://www.youtube.com/watch?feature=player_embedded&v=_2Kltr0SRGU

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.

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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.

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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.

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