RD1 Financial ReportsClassification and presentation of end of year financial reports•Income Statement•Balance Sheet
Income Statement Is a report prepared outside the ledger for presentation  to interested parties, showing details of the ...
Classification of revenues and           expenses Revenues  Sales can be further classified to facilitate decision   mak...
 Expenses  Generally classified into:    Selling and distribution    General and administrative    Finance           ...
Selling and distribution expenses All expenses incurred in promotion, selling and  distribution   Promotion eg advertisi...
General and administrative expenses All expenses incurred in running the office an any other  general expenses   Office ...
Finance expenses All expenses associated with either financing the  enterprise’s activities or expenses incurred in colle...
 Classification is useful   Assists with comparison of groups from one period to    another or with other organisations ...
Balance Sheet A balance sheet demonstrates the relationship between  assets, liabilities and owner’s equity.Oe = A - L   ...
Classification of assets, liabilities and             owner’s equity Assets   Classified primarily on a time basis     ...
 Current assets   will be consumed or converted to cash within one    accounting period from the current date.   Listed...
 Non-current assets   Further subdivided      Investment      Property, plant and equipment      Intangible          ...
 Non-current assets Investment   Anticipated to be held for longer than one accounting    period   Held for revenue-pr...
 Non-current assets Property, plant and equipment   Long-lived assets   Acquired for use in the operation of the busin...
 Non-current assets Intangible   Lack physical substance        Patents        Copyrights        Trademarks        ...
 Liabilities   Also classified on a time basis      Current      Non-current                                      16
 Current liabilities   will be paid within one accounting period from the current     date       Bank overdraft       ...
 Non-current liabilities    Period of indebtedness is longer than one     accounting period       Long-term loans      ...
 Owner’s equity    Changes made to the capital account during the period     are shown in the Balance Sheet       Openi...
Upcoming SlideShare
Loading in …5
×

Classification of final reports

1,043 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,043
On SlideShare
0
From Embeds
0
Number of Embeds
39
Actions
Shares
0
Downloads
6
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Classification of final reports

  1. 1. RD1 Financial ReportsClassification and presentation of end of year financial reports•Income Statement•Balance Sheet
  2. 2. Income Statement Is a report prepared outside the ledger for presentation to interested parties, showing details of the profit (or loss) for the year. 2
  3. 3. Classification of revenues and expenses Revenues  Sales can be further classified to facilitate decision making  Eg sales of cosmetics, sales of perfumes  Pharmacist may classify their revenues as: - Dispensing fees - Sales - Miscellaneous items eg commissions from medical funds 3
  4. 4.  Expenses  Generally classified into:  Selling and distribution  General and administrative  Finance 4
  5. 5. Selling and distribution expenses All expenses incurred in promotion, selling and distribution  Promotion eg advertising  Actual selling eg sales salaries and commissions  Delivery eg delivery van expenses, depreciation on delivery van, freight/transportation outwards 5
  6. 6. General and administrative expenses All expenses incurred in running the office an any other general expenses  Office expenses eg office wages, telephone  General expenses eg insurance, rates, loss on disposal of motor vehicle 6
  7. 7. Finance expenses All expenses associated with either financing the enterprise’s activities or expenses incurred in collecting cash  Financing the enterprise eg interest on loans, bank charges  Collecting cash eg bad debts, credit card charges 7
  8. 8.  Classification is useful  Assists with comparison of groups from one period to another or with other organisations  Changes can be analysed and decisions made based on spending patterns 8
  9. 9. Balance Sheet A balance sheet demonstrates the relationship between assets, liabilities and owner’s equity.Oe = A - L 9
  10. 10. Classification of assets, liabilities and owner’s equity Assets  Classified primarily on a time basis  Current  Non-current 10
  11. 11.  Current assets  will be consumed or converted to cash within one accounting period from the current date.  Listed in order of liquidity (being able to be converted into cash)  Cash  Accounts receivable  Inventories  Prepaid expenses  Accrued revenues 11
  12. 12.  Non-current assets  Further subdivided  Investment  Property, plant and equipment  Intangible 12
  13. 13.  Non-current assets Investment  Anticipated to be held for longer than one accounting period  Held for revenue-producing purposes  Government bonds  Shares  Debentures  Can be classified as ‘current’ assets if there is a probability that they will be converted into cash in the following accounting period 13
  14. 14.  Non-current assets Property, plant and equipment  Long-lived assets  Acquired for use in the operation of the business  Not intended for resale  Land  Buildings  Equipment  Furniture  Vehicles 14
  15. 15.  Non-current assets Intangible  Lack physical substance  Patents  Copyrights  Trademarks  Franchises  leaseholds 15
  16. 16.  Liabilities  Also classified on a time basis  Current  Non-current 16
  17. 17.  Current liabilities  will be paid within one accounting period from the current date  Bank overdraft  Accounts payable  GST Clearing  Short-term loans  Accrued expenses  Unearned revenues  Listed in order of payment 17
  18. 18.  Non-current liabilities  Period of indebtedness is longer than one accounting period  Long-term loans  Mortgages 18
  19. 19.  Owner’s equity  Changes made to the capital account during the period are shown in the Balance Sheet  Opening balance  Add: additional capital contributions  Add: profit made during the period  Less: losses  Less: drawings 19

×