Financial Statements - means by which information accumulated and processed in financial accounting is a periodically communicated to the users.
General purpose financial statements - directed to common users.
Components of Financial Statements
1. Statement of Financial Position
2. Income Statement
3. Statement of Comprehensinve Income
4. Statement of Changes in Equity
5. Statement of Cash Flows
6. Notes
Provide info about:
-Assets
-Liabilities
-Equity
-Income and Expenses including gains and losses
-Contributions and Distributions
-Cash Flows
Statement of Financial Position
-assets, liabilities and equity.
-evaluate liquidity, solvency and the need for additional financing
Assets - economic resource controlled by an entity as a result of past event
Current Assets - within a clearly identifiable operatinng cyle
-Cash and cash equivalents
-Financial assets at fair value such as tradig securities and other investments in quoted equity instruments
-Trade and other receivables
-Inventories
-Prepaid expenses
Noncurrent Assets - residual definition
-Property, plant and equipment
-Long-term investments
-Intangible assets
-Deferred tax assets
-Others
Liabilities - a present obligation of an entity to transfer an economic resource as a result of past event.
Current Liabilities - to be settled withing twelve months
-trade and other payables
-current provisions
-short term borrowing
-current portion of long term debt
-current tax liability
Noncurrent Liabilities - residual definition
-noncurrent portion of long term debt
-finance lease liability
-deferred tax liability
-long term obligations to company officers
-long term deferred revenue
Equity - assets less liabilities; net assets; owners - holders
Notes to financial statements - narrative description that does not fit in the financial statements; disclosures
Forms of statement of Financial Position
a. Report Form - downward
b. Account Form - assets (L), liabilities and equity (R)
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Income Statement - formal statement showing the financial performance of an entity; results of operations
Comprehensive Income - change in equity resulting from transactions other than with owners
a. Profit and Loss - income less expense
b. Other comprehensive income - reclassification adjustments
-equity investment (RE)
-revaluation surplus
-remeasurements benefit plan
-change in fair value credit risk
-debt investment (PL)
-foreign operation
-derivative cash flow hedge
Sources of Income
a. Sales of merchandise to customers
b. Rendering of services
c. Use of entity resources
d. Disposal of resources other than products
Components of Expense
a. COGS
b. Distribution costs
c. Administrative expensed
d. Other expenses
e. Income tax expense
*No more extraordinary items
Forms of Income Statement
》Functional presentation - COGS method
》Natural presentation - nature of expense method
Statement of Retained Earnings -part of changes in equity
-profit or loss
-prior period errors
-dividends declared and paid
-effect of change in accounting policy
-appropriation of retained earnings
Statement of Changes in Equity
-comprehensive income
-change in policy and errors
-transaction with owners
Statement of Cash Flows
-operating, investing and financing; cadh receipts and cash payments
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