Financial statement

FINANCIAL STATEMENT OVERVIEW
Financial Statements are the financial documents providing
significant information about the financial activities of the
business entity. The objective of financial statements is to
provide information about the financial position, financial
performance, status of owner’s equity, and cash flows of an
entity. It is useful for the stakeholders of an entity in making
economic decisions.
The stakeholders of the entity need this information as it could
affect their decision making. Those decisions involve buying,
selling, or holding of equity and debt instruments, and the
issuance or settlement of loans and other credit types.
www.explorerfinance.com

TYPES FINANCIAL STATEMENT
There are five types of financial statements based on
U GAAP and IAS 1 issued by IASB.
1-Statement of financial position
2-Income Statement
3-Statement of changes in equity
4-Statement of cash flows
5-Notes (Disclosure) to the financial statements

STATEMENT OF FINANCIAL POSITION
The Statement of financial position is a structured
presentation of the assets, liabilities, and equity of the
business on a particular date.
It is a detailed representation of a fundamental equation
which means all the resources (assets) owned by the
entity are financed through the sources of either debt or
equity.
A statement of financial position (formerly called a balance
sheet) is also referred to as a statement of net worth.

STATEMENT OF FINANCIAL POSITION
Key Points
• The statement of financial position shows the financial picture of the
business on a particular date (i.e., as of June 30, 2020, or December
10, 2020.).
• It has three major components: Assets, liabilities, and equity(capital).
•We can divide it into two parts: The upper half of the statement shows
the assets of the entity and the lower half of the statement shows
owners’ equity and liabilities.
•As the name of the balance sheet suggests, Assets = liabilities +
shareholders’ equity.

INCOME STATEMENT
The income statement is a financial document
providing detailed information about revenues,
expenses, and profit or loss for a specific period.
It helps users of the income statement to assess and
measure the financial performance of an entity. We
also know it as a statement of profit or loss.

INCOME STATEMENT
Key Points
The main objective of the income statement is to assess the
profitability and financial performance of the entity.
It also helps to predict the future performance of the entity.
Accountants prepare it for a specific period (i.e., for the month,
for the year)
There are three major components of the income statement:
revenues, expenses, and profit or loss.
The income statement has two forms, multi-step and single
step.

STATEMENT OF CASH FLOW
A statement of cash flows provides information about where a
business obtained its cash, and how that cash was used during
the financial period.
As per IAS 1, the statement of cash flows is a part of a complete
set of the financial statements of an entity.
IAS 7 requires entities to report cash flows for the period under
three sections:
• Operating activities
• Investing activities
• Financing activities.

STATEMENT OF CASH FLOW
Key Points
•It shows the movement of cash and cash equivalents.
•We prepare it for a specific period just like an income
statement (i.e., for the month, for the year).
•IAS 7 specifies the content and format of the statement of cash
flows.
•The total of the cash flows for all three sections together
explains the overall increase or decrease in cash and cash
equivalents during the period.
•There are two approaches to identify cash flows from operating
activities: Indirect method, and the Direct Method.

STATEMENT OF CHANGES IN EQUITY
Changes in equity is the increase or decrease in the net assets
of the entity. The statement of changes in equity tells users about
the status of the owners’ equity at the beginning of the financial
year, how it changed during the year and the status of the equity
at the end of the year.
•It shows the status of overall changes in owners’ equity.
•The components of a statement of changes in equity are: Share
capital, share premium, dividend, bonus shares, right shares,
and retained earnings.
•It is helpful for the users of financial statements, particularly
shareholders.

NOTES TO FINANCIAL STATEMENT
Notes are additional information together with other financial
statements. It requires an entity to disclose all information that
matters to financial statements and help users to have a better
understanding because this is the mandatory requirement by
IFRS.
•A statement of compliance with IFRS
•A summary of significant accounting policies applied
•Supporting information for items presented in financial
statements
•Other disclosures

Financial statement

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Financial statement

Similar to Financial statement (20)

Recently uploaded

Recently uploaded (20)

Financial statement