INTACC 3 LESSON 1

Accounting - language of business

FINANCIAL STATEMENTS - provide information
 The information accumulated and processed in financial accounting is periodically communicated to the users.
 Objective: to provide information about the financial position, financial performance and cash flows of an entity that
is useful to a wide range of users in making economic decisions.
 FS do NOT provide all the information that users may need to make economic decisions

General Purpose FS
 Statements intended to meet the needs of users who are NOT in position to require an entity to prepare reposrts
tailored to their particular information needs.
 NOT a general purpose FS if the reports are requested by an entity’s management or bankers

Financial Position
 assets, liabilities, equity - changes in contribution, dividends
 Pertains to the liquidity, solvency, and the need of the entity for additional financing

Financial Performance
 income, equity, revenue, expenses
 Also known as results of operations
 Performance - level of income earned by the entity

Cash flows
 cash inflows, cash outflows
 Cash receipts and cash payments arising from the operating, investing and financing activities of the entity.
 Useful in assessing the ability of the entity to generate cash and cash equivalents

Basic components of FS
1. Statement of Financial Position (BS) - financial position
2. Statement of Comprehensive Income - financial performance
3. Statement of Changes in Equity - financial performance and position
4. Statement of Cash flows - cash flows
5. Notes to FS
6. Additional Statement of Financial Position (restated)

SFP - “as of the”

SCI - “for the“
SCE - “for the”
SCF - “for the”

Characteristics/General Features of FS
1. Fair presentation - prepared in accordance of PRFS (explicitly stated)
2. Going concern - opposite of liquidating concern; the accounting entity is viewed as continuing in operation
indefinitely
3. Accrual basis - recognized revenue when earned, expenses when paid, cash basis (opposite)
4. Materiality and Aggregation
5. Offsetting
6. Frequency of reporting
7. Comparative information
8. Consistency of presentation

Separate Line Items

 Cash and cash equivalents
 Trade receivables
 PPE
 Biological assets
 Intangible assets
 Offsetting
 Frequency of reporting - annually (calendar year / fiscal year)
 Comparative information
 Consistency of presentation