Professional Documents
Culture Documents
ACCOUNT
ACCOUNT
Financial Statements:
Definition: Financial statement is a written record of the position and financial activity of a
business. A general-purpose set of financial statements usually includes a Balance sheet,
income statements, statement of owner’s equity, and statement of cash flows.
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1.Income Statement or profit and loss account: This statements is prepared to find out the
operating result of the organization for an accounting period To find out the operating
result ,revenue is adjusted operating expenses, when revenue become more than expenses, profit
is obtained or vice versa.
Types of Income statement
a. Single-step Income Statement: under this income statement, all expenses and loses are
added together and they deducted in a single-step form all revenue and gains to arrive at
net income.
b. Multi-Step Income Statement: The purpose of the multiple step income statement is to
subdivide the income statement into specific sections and provide the reader with
important subtotals.
2. Statement of Retained Earnings: Profit of the company has been categorized into two parts.
Dividend is the first part which is distributed to the shareholders and second type of profit is
transferred to the different types of reserve and surplus. The statement that shows the status of
the company by distributing the profits in different contents is known as Statement of Retained
Earning.
3. Balance Sheet: The statement shows the overall financial position of the organization for
fiscal year. The financial position involves the amount of assets, liabilities and shareholder’s
equity. The format given in company act for balance sheet does not consider T-shape or
horizontal format as it is usually practiced in class room for students.
4. Statement of change in owner/ Shareholder Equity: The statement of changes in equity is a
reconciliation of the beginning and ending balances in a company’s equity during a reporting
period. It is not considered an essential part of the monthly financial statements, and so is the
most likely of all the financial statements not to be issued. However, it is a common part of the
annual financial statements.
5. Cash Flow Statement: A cash flow statement is a financial statement that provides
aggregate data regarding all cash inflows that a company receives from its ongoing operations
and external investment sources. It also includes all cash outflows that pay for business
activities and investments during a given period.
Illustration-9
The following is the Trial balance of goodwill public limited as on 31 st December last year
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a. Income Statement
b. Balance sheet
Nepal Financial Reporting Standards ('NFRS') are designed as a common global language for business
affairs so that company accounts are understandable and comparable within Nepal. NFRS was issued
by Nepal Accounting Standard Board in 2013. Earlier it has issued Nepal Accounting Standards. NFRS is
prepared in line with on IFRS. To facilitate convergence process, it is expected that BFIs concurrently
initiate appropriate measures to upgrade their skills, Management Information System (MIS) and
Information Technology (IT) capabilities to manage the complexities and challenges of NFRSs.
Illustration 20
Notes:
1.1 Revenue from operation: Non-current Assets:
Sales 324,000 2.1 Property, plant and equipment
Less: Sales return 4,000 Office equipment 600,000
Net sales 320,000 Less: Accumulated depreciation (60,000
1.2 Cost of Sales: – 60,000) 120,000
Beginning Inventories
12,000
Show room furniture 200,000 480,000
Purchase net (20,000-2,000) Less: Accumulated depreciation(40,000 + 140,000
72,000
Purchase expenses 20,000) 60,000
Manufacturing expenses
12,000
Total
620,000
8,000
Ending inventory 2.2 Intangible assets:
(24,000)
Total Copyright
80,000
1.3 Other income: Current Assets: 144,000
Commission earned 2.3 Inventories
1.4 Distribution expenses: 8,000 2.4 Cash and cash equipment 24,000
Salaries expenses of sales person Cash
Carriage out ward 2.5 Other current assets:
12,000 8,000
Depreciation of show room furniture Prepaid insurance (8,000 – 3,000)
8,000
Total
20,000
Non-current Liabilities: 20,000
1.5 Administrative expenses: 2.6 Loan and borrowing:
40,000
Office salaries expenses(16,000 + Bank loan long term
16,000) Current Liabilities:
280,000
Depreciation of office equipment 32,000 2.7 Trade and other payable 12,000
Insurance expired Unearned commission (5,000 – 2,000) 60,000
Total 60,000 Creditors 8,000
12,000 Bill payable
104,000
16,000
1.6 Other expenses: Office salary outstanding
Tax payable 23,000
Interest expenses
Total 119,000
12,000 2.8 Loan and borrowing
Bank overdraft 48,000
Work Sheet:
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