FINANCIAL ANALYSIS AND REPORTING

WEEK 2

EXERCISES:

PROBLEM 1: TRUE OR FALSE

1. The primary purpose of financial reporting is to help management make economic decisions.
2. The financial statements are to be issued at least once every quarter.
3. The preparation of the financial statements is the responsibility of the external auditor engaged by the entity.
4. The statement of financial position reports the operating performance of the business.
5. Notes to financial statements are used to report information that does not fit into the body of the financial
statements in order to enhance the understandability of the financial statements.
6. Financial statements are the means by which the information accumulated and processed in financial accounting
is periodically communicated to the users.
7. When that exception applies, all assets and liabilities shall not be presented broadly in order the liquidity.
8. All liabilities should be classified as noncurrent liabilities.
9. An income statement beginning with profit or loss as shown in the income statement plus or minus the
components of other comprehensive income.
10. Financial statements are not complete without notes comprising the summary of significant accounting policies
and other explanatory notes.

PROBLEM 2: IDENTIFYING THE COMPONENT OF FINANCIAL STATEMENTS

Instruction: Enumerated below are the line items/ accounts of different financial statements. Identify and classify each
based on the component of financial statements whether it is a Statement of Financial Position, Income Statement,
Statement of Comprehensive Income and Statement of Changes in Owner’s Equity.

1. Issuance of ordinary shares

2. Freight-in
3. Current tax liability
4. Correction of error resulting from prior year underdepreciation
5. Revaluation surplus during the year
6. Trade and other receivables
7. Cost of goods sold
8. Dividends paid during the year
9. Foreign currency translation gain
10. Intangible assets
11. Provisions
12. Sales
13. Selling and administrative expense
14. Unrealized loss on derivative contract designated as cash flow hedge
15. Investment property