FINANCIAL STATEMENTS AND

THEIR ELEMENTS
 Basic Financial Statements and their Elements
 
Financial Statements
 
Are the formal reports prepared by accountants.
These statements show the financial effects of transactions and other events by grouping
them into broad classes according to their economic characteristics.
These broad classes are termed elements of financial statements.
 
 
The basic financial statements are:
 
1. Statement of Financial Position
 
Formerly known as the Balance Sheet
This accounting report shows the financial position of the business entity at any
given time.
The elements of financial position are Assets, Liabilities, and Owner’s Equity.
Income Statement
 
This accounting report shows the operating performance of the business entity for a
given period.
The elements of performance are Revenue, and Expenses.
 

Statement of Changes in Equity

 
This financial report shows the movements in the various elements of the owner’s capital
for a certain period.
The following are the basic components of this statement:
 
a. Owner’s investments to the business;
b. Profit or loss for the period;
c. Owner’s personal withdrawals; and
d. Prior period adjustments.
 
Cash Flow Statement
 
This financial report explains the changes of cash and cash
equivalents during an accounting period.
Cash equivalent is a short-term, highly liquid investment
that is easily convertible to cash.
The components of a cash flow statement are classified into
the following activities:
a. Operating activities – shows the inflows and outflows of
cash from the normal operating activities of the business.
b. Investing activities – shows the inflows and outflows of
cash from the sale or purchase of assets other than
inventory.
c. Financing activities – shows the inflows and outflows of
cash from the owners and creditors of the enterprise.
Relationships Among the Financial Statements

BASIC FINANCIAL STATEMENTS

INCOME STATEMENT OF CASH FLOW

STATEMENT FINANCIAL POSITION STATEMENT

Revenue Assets Operating

Activities

less = Investing
Activities
Expenses Liabilities
Financing
Activities
equals +
equals

Net Income (loss) Owner’s Equity

Cash and cash
equivalents

STATEMENT OF  Owner’s beginning capital

CHANGES IN  Additional investment
EQUITY  Net Income (loss)
 Prior period adjustments
 KC JANITORIAL SERVICES
Income Statement
For the Year Ended December 31, 200x

Revenues:
Service Income P 500,000
Rent Income 50,000
Interest Income 1,000 P 551,000

Operating Expenses:
Salary expense P 300,000
Supplies expense 500
Interest expense 550 301,000

Net Income P 250,000

Peso sign at the start of each column

Peso sign under each single line
Double line at the end of financial report
 KC JANITORIAL SERVICES
Statement of Owner’s Equity
For the Year Ended December 3, 200x

KC, Capital, January 1, 200x P 500,000

Add: Net Income 250,000
Total P 750,000
Less: KC, Drawing 10,000
KC, Capital, December 31, 200x P 740,000

KC ending capital is to be forwarded to the Statement of Financial

Position.
 KC JANITORIAL SERVICES
Statement of Financial Position
As of December 31, 200x

Assets
Current Assets
Cash 566,500
Accounts Receivable 50,000
Notes Receivable 150,000 P 766,500

Non-Current Assets
Equipment 60,000
Total Assets P 826,500

Liabilities and Owner’s Equity

Current Liabilities
Accounts Payable P 500
Notes Payable 36,000
SSS Payable 20,000
Withholding Tax 30,000 P 86,500
Payable

Owner’s Equity:
KC, Capital, December 31, 200x 740,000
Total Liabilities and Owner’s Equity P 826,500

A SFP report form presents its elements in vertical order.

 KC JANITORIAL SERVICES
Statement of Financial Position
As of December 31, 200x

Assets
Current Assets
Cash 566,500
Accounts Receivable 50,000
Notes Receivable 150,000 P 766,500

Non-Current Assets
Equipment 60,000
Total Assets P 826,500

Liabilities and Owner’s Equity

Current Liabilities
Accounts Payable P 500
Notes Payable 36,000
SSS Payable 20,000
Withholding Tax 30,000 P 86,500
Payable

Owner’s Equity:
KC, Capital, December 31, 200x 740,000
Total Liabilities and Owner’s Equity P 826,500

A SFP report form presents its elements in vertical order

 KC JANITORIAL SERVICES
Statement of Financial Position
As of December 31, 200x

Assets Liabilities and Owner’s Equity

Current Assets Current Liabilities
Cash P566,500 Accounts P 500
Payable
Accounts 50,000 Notes Payable 36,000
Receivable
150,000 P766,500 SSS Payable 20,000
Withholding Tax
Non-Current Assets Payable 30,000 P 86,500
Equipment 60,000
Owner’s Equity:
KC, Capital 740,000
Total Assets P826,500 Total Liabilities and Capital P826,500

An account form SFP presents its elements in

horizontal order following the accounting equation,
assets = liabilities + capital.
 KC JANITORIAL SERVICES
Statement of Cash Flows
For the Year Ended December 31, 200x
     
Operating Activities:    
Collections from:    
Cash services P 200,000  
Notes receivable 100,000  
Rent Income 50,000  
Interest Income 1,000  
Payments of:    
Salary (250,000)  
Interest expense ( 500)  
Net cash from operations   P100,500
     
Financing Activities:    
Owner’s contribution P500,000  
Owner’s withdrawals ( 10,000)  
Net cash from financing   490,000
     
Investing Activity:    
Purchase of Equipment (P 24,000)  
Net cash from investing   (24,000)
Net Increase in cash   P566,500
Add: Cash, Beginning   -0-
Cash, December 31, 200x   P566,500
 THANK YOU!
 
ELSA E. LOZANO, MBM, LPT