fabm 2

elements of sci

• income

• expenses

Increases in economic benefits during the period in the form of increases in assets, or decreases in liabilities, the result in increases in equity, excluding those relating to investments by the business owner.

Income

arises in the course of the ordinary activities of business.

revenue

earnings from a service

service fee

sale of goods, in cash or credit

sales

earnings of the owner from his/her property.

rent income

includes interest earned on savings accounts; time deposits; investments; & notes receivables.

interest income

represent other items that meet the definition of income and may or may not arise in the course of the ordinary activities of an entity.

gains

Reduction in value of an asset as it is used to generate revenue.

expenses

Cost of doing the business

expenses

Arise in the course of the original activities of a business.

expenses

represent other items that meet the definition of expenses and may or may not arise in the course of the ordinary activities of the entity.

losses

• There are several steps needed in order to arrive at the company’s net income.

• Commonly used by merchandising companies.

multi-step income statement

Total amount of revenue that the company was able to generate from selling products.

sales

• discounts given to customer who pay early are recorded.

• cash discount

• different from trade discount

• awarded to customers who pay earlier or before the deadline.

sales discount

Debited in order to record returns of customer or allowance for such returns. Sales returns occurs when customer return their products for reasons such as but not limited to defects or change of preference.

sales returns & allowances

amount of goods bought during the current accounting period.

purchases

Account used to record early payments by the company to the suppliers of merchandise. This is how a buyer see a sales discount given to them by a supplier.

Purchase Discount

Accounts used to record merchandise returned by the company to their suppliers. This is how buyers see a sales return recorded by their supplier.

purchase return & allowances

Structured representation of an entity’s financial positions and results of its operation

financial statement

To provide information that is useful in making decisions.

Financial statements

End product of the accounting process.

financial statements

types of financial statements

1. Statement of Financial Position

2. Statement of Profit and Loss and Other Comprehensive Income

3. Statement of Changes in Equity

4. Statement of Cash Flows

5. Notes

• Reports the financial condition of the company

• Also known as “Balance Sheet”

Statement of Financial Position

Statement of Financial Position is composed of:

• assets

• liabilities

• owner’s equity

Properties or rights on properties owned by the business.

Assets

• Controlled by the enterprise

• Results from the past events

• Give future economic benefits

• Can be used by themselves alone to yield income

Assets

Present obligations of an entity from past transactions or events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.

Liabilities

Certificate of indebtedness under the seal of corporation, under the terms of repayment and the rate of interest to be charged.

Bonds Payable

Is the residual interest in the assets of the entity after deducting all its liabilities.

Owner’s equity

statement of financial position types of form:

• Report Form

• Accounts Form