Shaheed Zulfikar Ali Bhutto Institute of Science and Technology

Islamabad

Bachelors of Business Administration

Assignment # 02

Question 1: What is Financial Accounting all about?

Financial accounting is the study of how to record, classify, and summarize financial statement
in a way that it helps with decision making process. The recording of financial information is
done on “General Journal”, where all the transaction are listed while classification is done on
ledger where transactions are listed depending on their types. These are also called the two
books of accounts. Summarizing is dine on financial statements. There are further 4 types of
financial statements.

Question2: Briefly explain all types of financial statements.

1. Balance sheet:
This tells us about the financial position of the business. In simpler terms it tells us about
the worth of any business. In a balance sheet, assets, liabilities, and shareholder equity is
used to calculate any businesses worth.
2. Income Statement:
Income statement tells us about the income of a business by mentioning the revenue and
expense of a business. By subtracting the expenses from the revenue, we can determine
whether a business is facing losses or gaining profit.
3. Statement of Cash Flow:
This statement tells us about the changes of cash within the business; their inflows, and
outflows. It is calculated by considering the business operations, investments, and
financial activities.
4. Statement of Changes in Equity:
 This tells us about the changes in an owners’ or shareholders’ equity in an accounting
period. This is calculated with the help of net profit or loss, dividend payments, and
equity withdrawal.

Question 3: Explain accounts of income statement.

There are two accounts of income statements;

1. Revenues:
These are the total earning of a business that it acquires by selling or providing their
goods or services. This can be calculated by multiplying the price os a single good or
service with units sold.
2. Expenses:
These are the costs that a business has to pay in order to sell their goods or services.
These expenses include various payments such as; rent, labor, wages, etc.

Question 4: Explain accounts of balance sheet.

There are three accounts of a balance sheet;

1. Financial Resources:
These are also knows as the assets of a business. These are the investments made by the
shareholders into the business. These can also be the capital or physical belongings i.e.
machinery of the business as well.
2. Shareholder Equity:
This is the claim of the owner as they invest huge amounts of capital into the business. To
compensate them, the business pays monthly dividends to the owner.
3. Financial Obligation:
It is also known as the liability of the business. These are the loans that the business has
to pay back to the lenders. These lenders are usually banks that give long term loans to
businesses with ease.