CFAS (Financial Statements)

1. STATEMENT OF FINANCIAL POSITION

2. STATEMENT OF FINANCIAL PERFORMANCE

3. STATEMENT OF CASH FLOWS.

4. STATEMENT OF OWNER'S EQUITY

5. NOTES TO FS

5 General purpose of FS

Accounting Concept: Adequate Disclosure

Businesses communicate financial information to the public

Elements

The items reported in the FS are organized into classes or categories known as

1. Assets

2. Liabilities

3. Equity

4. Common Stocks

5. Revenue

6. Expenses

7. Distributions

8. Net income

9. Gains

10. Losses

Ten elements of financial statements

Accounts

Elements represent broad classifications as opposed to specific items; the sub classifications of elements

Ledger

Called as the group of accounts

General Ledger

Contains all accounts needed to prepare FS

Chart of accounts

Accounts are listed in the ____________________ and assigned an account number

File Maintenance

The procedure for arranging accounts, assigning account numbers, and keeping records current.

Account numbers

____________ are assigned based on the account’s location in the general ledger

Existing accounts

These are numbered by 10’s to allow room for new accounts to be added

F

ASSETS are organized by liquidity

T/F

Expenses are organized by liquidity

True

T/F

Liabilities and Expenses are listed alphabetically

capital, drawings

These are owner’s equity

Revenue

Sales are part of what account?

1. Income statements

2. Balance sheet

3. Statement of Owner’s Equity

4. Statement of Cash Flows

4 common reports of Financial Statements

Income Statement

The report of a company’s operating performance, in financial terms, over a period of time

1. Revenue

2. Costs of goods sold

3. Gross profit

4. Operating expenses

5. Net income or net loss

5 major sections of report information

F

Income statement has 3-line heading

T/F

Income statement has 2-line heading

specified period of time

The income statement of reporting is for a ____________

Accounting period

The time period covered by the financial statements is called the ____________

1. Revenue

2. Expenses

3. Gross profit on sales

4. Operating Expenses

5. Net income

Elements of an income statement

Sales/Revenue

Earnings from the sale of goods or the performance of service

Sales return and Allowances

The refunds or adjustments for unsatisfactory merchandise or service

Gross profit on sales

The difference between the net sales and the cost of goods sold

F

Use a SINGLE underline for subtotals. Double underline for final totals

T/F

Use a double underline for subtotals

Statement of Owner’s Equity

Also referred to as Statement of Stockholder's equity and Statement of Retained Earnings.

ending capital + sales - expenses

This is how to calculate Owner’s Equity on the balance sheet

Balance sheet

Describes the financial situation of a company at a specific point in time.

1. Name of business

2. Name of Financial Statement

3. Specific date

Heading of balance sheet

1. To show the assets owned by a company.

2. To show the liabilities owed by a company.

3. To represent a company’s net worth.

Purpose of a Balance Sheet

TRUE

T/F

The relationship among the financial statements is imperative to understanding the components of each statement.