Part nine

A financial statement (or financial report) is a formal Record of the financial activities of a Business, person, or other entity.

financial statement includes :

1.Statement of Financial Position : also referred to as a balance sheet, reports on a company's assets , liabilities , and ownership equity at a given point in time. Statement of Financial Position : also referred to as a Balance sheet, reports on a company's Assets , LIABILITIES , and ownership Equity at a given Point in time.

2.

Statement of Comprehensive Income : also referred to as Profit and Loss statement (or a "P & L"), reports on a company's Income, Expenses, and profits over a period of time. A Profit & Loss statement provides information on the operation of the Enterprise . These include sale and the various expenses incurred during the processing state.

3. Statement of Changes in Equity : explains the changes of the company's equity throughout the reporting period Statement of Changes in Equity : explains the changes of the company's Equity throughout the reporting period

• 4. Statement of Cash flows : reports on a company's Cash Flow activities, particularly its operating, investing and financing activities.

Financial Statements

Let’s prepare the Financial Statements reflecting the transactions we have recorded.

1. Income Statement2. Statement of Owner’s Equity3. Balance Sheet4. Statement of Cash Flows

1. Income Statement2. Statement of Owner’s Equity3. Balance Sheet4. Statement of Cash Flows

P1

6

Income Statement

• Summary of an entity’s revenues, expenses, and net income or net loss for a specific period

Revenues - Expenses

• Net Income: Revenues > Expenses

• Net Loss: Expenses > Revenues

7

Statement of Owner’s Equity

• Summary of changes in an entity’s owner’s equity during a specific period

Beginning owner’s equity+ Owner’s investments+ Net income- Net loss- Owner’s withdrawalsEnding owner’s equity

Net income is the difference between Revenues and Expenses.

Net income is the difference between Revenues and Expenses.

The income statement describes a company’s revenues and expenses along with the resulting net

income or loss over a period of time due to earnings activities.

The income statement describes a company’s revenues and expenses along with the resulting net

income or loss over a period of time due to earnings activities.

Income StatementP1

Scott CompanyStatement of Owner's Equity

For Month Ended December 31, 2007

Capital, December 1, 2007 -$ Plus: Investments by Owner 20,000$

Net Income 2,200 22,200 22,200

Less: Withdrawals by owner 500Capital, December 31, 2007 21,700$

The net income of $2,200 increases Owner's Equity by

$2,200.

The net income of $2,200 increases Owner's Equity by

$2,200.

Statement of Owner’s EquityP1

The Balance Sheet describes a company’s financial position at a point

in time.

The Balance Sheet describes a company’s financial position at a point

in time.

Balance SheetP1

Statement of Cash FlowsP1

Notes To The Financial Statements Notes to the financial statements are an integral part of the

statements and are required by Generally Accepted Accounting Principles. Notes to financial statements sometimes referred to as footnotes, are used to provide additional information about a business's financial condition and methods used at arriving at the amounts presented in the financial statements.

These notes contain important information about such things as the accounting methods used for recording and reporting transactions, any pending lawsuits or regulations that may affect the business, and other information that should be disclosed in order to properly analyze and evaluate the financial condition of the business.

The Need for Adequate Disclosure

Notes to the financial statements often

provide facts necessary for the

proper interpretation of the

statements.

Notes to the financial statements often

provide facts necessary for the

proper interpretation of the

statements.

Income Statement

Balance Sheet

Statement of Cash Flows

Relationships Among Financial Statements

Date at beginning of

period

Date at end of period

Balance Sheet

Balance Sheet

Time

Income StatementStatement of Cash Flows

Statement of Cash Flows

Balance Sheet

Income Statement

Other Information:•Industry•Competitors•National economy

Financial Reporting and Financial Statements

Financial statements are just one source of financial

accounting information.

Financial statements are just one source of financial

accounting information.