Topic Outline

Financial Statement
Statement of Financial Position
Statement of Financial Performance
Statement of Cash Flow
Financial Statement
• In is an official document of the firm, which explores the entire financial information of the firm. The main aim
of the financial statement is to provide information and understand the financial aspects of the firm.
• Financial statement is the summary of the accounting process, which provides useful information to both
internal and external parties.
• According to Humptors John, the financial statement is an organize collection of data according to logical and
consistent accounting procedures. Its purpose is to convey an understanding of financial aspects of a business
firm.

• John N. Nyer also defines it “Financial statements provide a summary of the accounting of a business enterprise,
the balance-sheet reflecting the assets, liabilities and capital as on a certain data and the income statement
showing the results of the operations during a certain period”
Three Basic Financial Statements
1. Statement of Financial Position (Balance Sheet) - This report or statement presents the financial status of the
firm at a particular point in time. It shows the amount of assets of a firm, the extent of liabilities owed and the
owner’s equity or capital invested by the owner.
ABC Company
Balance Sheet
December 31, 2015

Assets

Current Assets
Cash P 1,001,000
Account Receivable (net) 12,750
Notes Receivable 22,000
Inventory 6,000
Office Supplies 1,000
Prepaid Expenses 28,250
Non-current Assets
Investment (long term) 100,000
Land 200,000
Building (net) 199,350
Furniture & Fixtures (net) 487,525
Machinery & Equipment (net) 29,875
Intangible Assets 148,775
Total Assets P 2,236,525

Liabilities and Equity

Liabilities
Accounts Payable P 330,000
Notes Payable 55,000

Equity
Share Capital, 5 par 200,000 shares outstanding 1,000,000
Retained Earnings 851,525
Total Liabilities and Owner’s Equity P 2,236,525

2. Statement of Financial Performance (Income Statement) - this report or statements presents the results of the
firm’s profit-oriented activities for a certain period. Its shows the volume of revenues generated as well as the
expenses incurred by the firm.

ABC Company
Income Statement
For the period ended Dec. 31 2015

Sales 5,375,000

Cost of Sales 2,584,625

Gross Profit 2,790,375
Operating Expenses:
Salaries and Wages 1,789,800
Repairs and Maintenance 50,000
Utility Expense 89,800
Interest Expense 5,500
Insurance Expense 1,750
Supplies Expense 2,000 1,938,850
Net Profit (Loss) 851,525

3. The Statement of Cash Flows

This report or statement provides relevant information about the cash receipts and cash payments of a firm
during a period.
In general, investing activities involve acquisition and sale of capital assets. Financing activities involve
barrowings, repayments, investments and withdrawals of the owner. Operating activities involve receipts from
customers and operating expenses paid.
ABC Company
Statement of Cash Flows (Indirect Method)
For the Period Ended Dec. 31, 2015
Net Income 851,525
Add: Depreciation 13,250
Increase in AR (12,750)
Increase in NR (22,000)
Increase in INVTY (6,000)
Increase in Supplies (1,000)
Increase in Prepaid Expenses (28,250)
Increase in AP 330,000
Increase in NP 55,000
Purchase of Investment (100,000)
Purchase of Land (200,000)