Financial statements

1. Financial Position (Balance Sheet) – as at the end of the period

- lists of all assets, liabilities, and equity

2. Financial Performance (Income Statement) – for the period ended

- summary of the revenues and expenses

3. Changes in Equity – for the period ended

- summary of the changes in equity such as investment, profit or loss
and withdrawal during the period

4. Cash Flows – for the period ended

- amount of cash received and disbursed during the period

Financial Position
- users of financial statements analyze the balance sheet to evaluate
an entity’s liquidity, it financial flexibility, and its ability to generate
profits, and its solvency

Liquidity – refers to the availability of cash in the near future

Financial Flexibility – ability to take effective actions to alter the amount
and timings of cash flows so that it can respond to
unexpected needs and opportunities.
Solvency – availability of cash over the longer term

Operating Activities
- involve providing services, and producing and delivering goods.
- Current Assets & Current Liabilities

Investing Activities
- making and collecting loans; acquiring and disposing of investments
- Non-current assets

Financing Activities
` - obtaining resources from owners and creditors
- Noncurrent Liabilities
Closing entries are journalized and posted

Income, expense and withdrawal accounts are temporary accounts.

Income summary
- used to close the income and expense account
- thus the balance of the owner’s capital account represents the
cumulative net result of income, expense and withdrawal transactions.

1. Close the income accounts

- debiting each revenue account in the amount of its balance
is needed to close the account and credit is made to the income
summary.
- the dual effect of the entry is to make