NAME: Calagui, Erika Mae C.

DATE: September 25, 2022

SECTION: ABM12 – Bacon Business Finance

Activity 3

1. Differentiate the 3 financial statements.

Financial statements are written records that convey the business activities and the financial
performance of a company. (MURPHY, 2021 ) (INVE STOPE DIA)
1. Statement of comprehensive income or income statement
2. Statement of financial position or balance sheet
3. Statement of cash flow or cash flow statement

The Statement of Comprehensive Income (SCI) or Income Statement shows the results of operations of
the business by reporting the REVENUE, COST and EXPENSES FOR the specific accounting period.
Income Statement accounts, namely income or revenue, expenses, and drawings, are classified as
nominal or temporary accounts.

The Statement of Financial Position (SFP)/Balance sheet reports the balances of assets, liabilities and
equity of the business as of a point in time. Balance sheet accounts, namely assets, liabilities, and
owner's equity, are classified as real or permanent accounts.

The Statement of Cash Flows (SCF) / Cash Flows Statement (CFS) freports the actual cash inflows and
outflows for the period that are classified into the three main business activities, namely, operating,
investing and financing activities. It also summarizes the cash receipts and cash disbursements for the
accounting period. It summarizes the cash activities of the business by classifying cash inflows (receipts)
and cash outflows (payments) into operating, investing, and financing activities. It shows the net
increase or decrease of cash in a given period and the cash balance at the end of the period. This
allows management to assess the business' ability to generate cash and project future cash flows.

2. Describe the relationship between the cash and cash equivalent entry in the statement of
financial position and that of the statement cash flows.

The Statement of Financial Position (SFP)/Balance sheet

Cash includes coins, currencies, checks, bank deposits, and other cash items readily available for use in
the operations of the business while Cash equivalents are short-term investments that are readily
convertible to known amounts of cash which are subject to an insignificant risk to changes in value (per
SFAS No. 22, revised 2000).

The Statement of Cash Flows (SCF) / Cash Flows Statement

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash and that are subject to an
insignificant risk of changes in value. (Reference)