2. Financial Statements
- Financial statements are written records that convey the business
activities and the financial performance of a company.
- foremost objectives is to provide information concerning the financial
position , performance and cash flows of a company needed by external
users in making sound ecomic decisions.
- provide the basic source of information by managers regarding it’s
financial conditions and results of operations.
- although financial statements are primarily prepared for external users,
managers find it equally useful for making decisions for the company.
3. Types of Financial Statements
1. Statement of Financial Position (Balance Sheet)
2. Income Statements
3. Statement of Cash flows
4. Statement of Changes in Equity
4. Statement of Financial Position
ASSETS - are resources controlled by the entity as a result of
past transactions and events from which future economic
benefits are expected to flow in the entity
Types of Assets
1. Current Assets - cash or cash equivalents, hold the assets for
the purpose of trading, expects to realize the assets within 12
months.
2. Non-current Assets - if the asset is not a current one then it is
a noncurrent assets.
5. Statement of Financial Position
Liabilities - are the present obligations of the firm from past
transactions and events, the payment of which is expected to
result in an outflow of economic resources.
Types of Liabilities
1. Current Liabilities - expected to pay the libaility within 12
months, holds the liability for the purpose of trading.
2. Non-current Liabilities - if the liability is not a current one
then it is a noncurrent liability.
6. Statement of Financial Position
Shareholders’ Equity
- represents the total amount of capital in a company that is directly linked
to its owners. It is calculated by taking the total assets minus total liabilities.
Shareholders' equity determines the returns generated by a business
compared to the total amount invested in the company.
Retained earnings are part of shareholder equity. This is the percentage of
net earnings that is not paid to shareholders as dividends.
3 Basic components Shareholders’ Equity
1. Share capital
2. Reserves
3. Retained earnings
7. Income Statements
- a financial statement that shows you the company's income and
expenditures. It also shows whether a company is making profit or loss
for a given period. The income statement, along with balance sheet
and cash flow statement, helps you understand the financial health of
your business.
- used for reporting a company’s financial performance over a specific
accounting period.
8. Statement of Cash Flows
- provides a summary of the firm’s operating, investing,
financing activities for the cash flows.
-this statements reconciles the beginning and ending of cash in
the Balance Sheet or SFP. The ending balance of the SCF is also
the ending balace of cash in the Balance Sheet.
- this statement shows the movements (receipts and
disbursement) of cash from the whole period or 1 year.
9. Statement of Changes in Equity
- the developments or changes that occur in the shareholder’s
equity are presented in this statement.
- this statement includes changes in share capital and retained
earnings.
