Are You Ready?

1.
INTRODUCTION
SOPL & SOFP
Two reports business normally prepare

1. Statement of Profit & Loss (SOPL)

2. Statement of Financial Position (SOFP)

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2.
FINANCIAL
STATEMENT
ELEMENT
ASSETS
 ASSET

Assets are resources or items of

value that the business owns
and expected to generate
economic benefit in the future.
ICE CREAM ‘SUNDAE CONE’
 ASSETS

NON- CURRENT ASSETS

Cash and other assets which are short-
CURRENT/FIXED term in nature
ASSETS Normally can be converted into cash
Kept and used on long- (<12 months)
term basis (>12 months) Ex – Inventories and debtor

TANGIBLE/FIXED LONG-TERM
INTANGIBLE
ASSETS Non-physical assets
INVESTMENTS
Assets that have physical Bought for the purpose of
Eg- Goodwill,
substance earning interest or dividend
trademarks
Ex: Land, building, equipment, Eg- Fixed deposit, ASB
motor vehicles
LIABILITIES
 LIABILITY 2. External parties’
claim to the
1. The obligations business
of an entity to assets.
other entities.
3. Amounts owed
by a business to
outside parties.
 LIABILITIES

Non Current Liabilities Current Liabilities

* Debts Repayable in more than a * Debt which are repayable within
year ( > 12 months) the year
Eg; Long term loan, mortgage, ( < 12 months )
debentures Eg; creditors, bank overdraft
 Owner’s equity
▫Owner’s claim on the business assets:

Capital: Amounts contributed by the owner to the

business (in the form of cash or other assets).
Accumulated Profits: Profits earned (or minus the loss
incurred) and retained in the business.
Drawings: Cash or goods taken by the owner for personal
use.

Owner’s equity = Capital + Accumulated Profits - Drawings

 Revenues
Income generated by the business,
either from trading or normal
operating activities.
 REVENUES

FROM THE USE OF THE

RENDERING BUSINESS’ ASSETS BY
SALES OF OTHERS
OF
GOODS • Rental income
SERVICES
Ex: KFC - Sales • Interest income (cash
Ex: Fees from
of fried chicken deposit in a bank)
tuition fees
• Royalties (copyright)
• Dividend income
(investment in share)
 Expenses
Cost incurred in the normal course of
business to generate revenues.
 EXPENSES

COST OF SALES
SELLING AND
Purchases of stock
DISTRIBUTION
Eg- Freight, insurance and
Eg-Salesman’s salaries and
transport cost (carriage inwards)
commissions
for bringing the goods to the
business premise

ADMINISTRATIVE
FINANCE COSTS
Eg- Electricity and
Eg- Interests on loans
water, rental expense
Are you ok
so far?? 19
LET’S DO
SOME
EXERCISE
(REFER
TUTORIAL 1)
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Thanks!
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