Oxfordian Colleges, Inc.

F. Dela Cuesta St., Sitio Pintong Gubat Barangay Paliparan III,

City of Dasmariñas, Cavite
09104308750/(046)4899689

Name : RENIER P. CRUZ Score __________

Subject Conceptual Framework Date: _______ Instructor: Mrs. T. B. Corrales

Answer the following questions.

1. What are the components of Financial Statement? Explain in brief.

The components of financial statements are Income Statement, Balance

Sheet, Cash Flow Statement and Shareholder’s Equity Statement.

The Income Statement reports the financial performance of the business

over some time and comprise of the revenue, expenses and all the gains and
losses which are not attributable in the ordinary course of business.

The Balance Sheet reports the financial position of the business at a

particular point in time. It shows the Assets owned by the business on one
side and sources of funds used by the business to hold such assets in the
form of Capital contribution and liabilities incurred by the business on the
other side. In a nutshell, the Balance Sheet shows how the money has been
made available to the business of the company and how the company
employs the money.

The Cash Flow Statement shows the changes in the financial position of the
business from the perspective of the movement of cash into and from the
business.

The Shareholder’s Equity Statement reports the amount and sources of

changes in Equity Shareholders Investment in the business over a while.
It summarizes the changes in the capital and reserves attributable to
equity holders of the company over the accounting period.

2. Why is Financial Position important for investors and creditors ?

Financial statements are important to investors because they can provide

enormous information about a company's revenue, expenses, profitability,
debt load, and the ability to meet its short-term and long-term financial
obligations.
 Oxfordian Colleges, Inc.
F. Dela Cuesta St., Sitio Pintong Gubat Barangay Paliparan III,
City of Dasmariñas, Cavite
09104308750/(046)4899689

3. What are the sources of Income?

Income is the money that an individual or business receives from different

sources which are: Employment Income (from a job), Self-employment
Income (their own business), Investment Income (interest, dividends, capital
gains, rental income) and Government Transfers (El, CPP, family benefit).

4. What line items should be included in the income statement and statement
of comprehensive income?

Comprehensive income includes net income and unrealized income, such

as unrealized gains or losses on hedge/derivative financial instruments and
foreign currency transaction gains or losses.

The income statement focuses on four key items which are: revenue,
expenses, gains, and losses. It does not differentiate between cash and
non-cash receipts (sales in cash versus sales on credit) or the cash versus
non-cash payments/disbursements (purchases in cash versus purchases on
credit).

5. What are the three characteristics of an ingredient of faithful

representation?

Three main ingredients are completeness, free from material error and
neutrality.

Completeness is the adequate or full disclosure of all necessary information.

Free from Material Error means no inaccuracies and omissions.

Neutrality refers to the fairness and freedom from bias.

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