FINANCIAL

STATEMENTS
AS A STUDENT, I AM EXPECTED
TO
- describe the three types of financial
statements – statement of financial position,
statement of comprehensive income, and
statement of cash flows.
- reflect on the importance of financial
statements in the business world.
WHAT IS THE PURPOSE OF
FINANCIAL STATEMENT?
 
• To report a variety of seemingly complex information such
that the end-users will be able to make sense of the given
information.
• Will give the users a way to read, understand, interpret, and
analyze economic transactions translated into financial
records.
 
TYPES OF FINANCIAL
STATEMENT

Financial position
Comprehensive income
Cashflow
FINANCIAL POSITION
▪ 
ASSETS
▪ Current vs. Non-Current Assets

Current Assets are assets that can be realized

(collected, sold, used up) one year after year-
end date. Non-current Assets are assets that
cannot be realized (collected, sold, used up) one
year after year-end date.
ASSETS

Tangible vs. Intangible Assets

 
Tangible Assets are physical assets
Intangible Assets are non-physical assets
 CURRENT ASSETS
• Cash is money on hand, or in banks,
• Accounts Receivables are amounts due from customers
• Notes Receivables are amounts due from clients
• Inventories are assets held for resale
• Supplies are items purchased by an enterprise
• Prepaid Expenses are expenses paid in advance.
• Accrued Income is revenue earned but not yet collected
• Short term investments are the investments made by the
company that are intended to be sold immediately
NON-CURRENT ASSETS

• Property, Plant and Equipment are long-lived assets which have

been acquired for use in operations.

• Long term Investments are the investments made by the

company for long-term purposes

• Intangible Assets are assets without a physical substance.

Examples include franchise and copyright.
LIABILITIES
Current vs. Non-Current Liabilities.
 
Current Liabilities that fall due (paid, recognized as
revenue) within one year after year-end date.. Non-current
Assets are liabilities that do not fall due (paid, recognized as
revenue) within one year after year-end date.
CURRENT LIABILITIES

∙ Accounts Payable are amounts due, or payable to, suppliers for

goods purchased on account or for services received on account.
∙ Notes Payable are amounts due to third parties supported by
promissory notes.
∙ Accrued Expenses are expenses that are incurred but not yet paid
∙ Unearned Income is cash collected in advance;
NON-CURRENT LIABILITIES

∙ Loans Payable
∙ Mortgage Payable
 
OWNER’S EQUITY
Capital is the value of cash and other assets
invested in the business by the owner of the
business.
Drawing is an account debited for assets
withdrawn by the owner for personal use from
the business.
COMPREHENSIVE INCOME
- financial statement that summarizes a firm’s sales,
expense incurred, a result of operations.
- prepared quarterly or annually
- The result of the operations is reported as income
when revenue exceeds expenses, and loss when
expenses are greater than revenue.  
Income is the increase in economic benefits during the
accounting period in the form of inflows of cash or
other assets or decreases of liabilities that result in
increase in equity. Income includes revenue and gains.

Expenses are decreases in economic benefits during

the accounting period in the form of outflows of assets
or incidences of liabilities that result in decreases in
equity.
CASHFLOW
▪ Cashflows are categorize in three areas:
• Operating
• Investing
• Financing
- Cash receipts and cash payments are included in
one of these categories depending on the nature
of transaction.
OPERATING ACTIVITIES
SECTION
• money generated from the regular activities of the firm
• Regarded as the most important section since it provides
cash flow information related to the daily operations of the
business.
• Include cash activities related to net income.
• Tell us how much cash was generated from the daily
activities of the company’s core activities.
INVESTING ACTIVITIES SECTION
• Presents information about cash activities related to
noncurrent assets.
• Non – current assets includes:
• Long-term investments
• Property, plant, equipment
• The principal amount of loans made to other
entities
▪ 
FINANCING ACTIVITIES
SECTION
• Non-current liabilities include:
• Principal amount of long-term debt related to
loans
• Owner’s equity include:
• Stocks sales and repurchases
• Dividend payments
STATE THE TERMS DEFINED BY
THE FOLLOWING.
1. It is the obligations of the company payable in money, goods or services.
2. These are non-current tangible assets.
3. These assets are identifiable, non-monetary assets without physical
substance.
4. It is the claim of the owner also known as the capital.
5. It is the most liquid asset and is the medium of exchange for business
transactions.
6. It is an expense for leased office space, equipment or assets rented from
others.
7. Examples of this are cash, account receivable and prepaid expenses.
8. It is a written promise from the customer to pay his receivables on a certain
future date.
INDICATE WHETHER THE FOLLOWING ITEMS WOULD APPEAR ON THE INCOME
STATEMENT (IS), OR BALANCE SHEET (BS).
 

▪ 1. ________ Office Supplies

▪ 2. ________ Accounts Payable

▪ 3. ________ Computer Equipment

▪ 4. ________ Commission Fees Earned

▪ 5. ________ Salaries Expense

▪ 6. ________ B. So, Capital

▪ 7. ________ Accounts Receivable