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Week 1 - 5

Accounting and
Financial
Management
Financial Accounting, IFRS 2nd Edition
Weygandt ● Kimmel ● Kieso

Prepared by : Mohammad Alvin, SE, MM


Week 1

Introduction to
Accounting Cycle
Financial Accounting, IFRS 2nd Edition
Weygandt ● Kimmel ● Kieso

Prepared by : Mohammad Alvin, SE, MM


THE ACCOUNTS

Record of increases and decreases in a


specific asset, liability, equity, revenue, or
expense item.
Debit = “Left” and Credit = “Right”
Account Name
Debit / Dr. Credit / Cr.

An account can be illustrated in


a T-account form.
DEBITS AND CREDITS
Double-entry accounting system.
Each transaction must affect two or more
accounts to keep the basic accounting
equation in balance.

Recording done by debiting at least one


account and crediting another.

DEBITS CREDITS
DEBITS AND CREDITS

Assets Liabilities
Debit / Dr. Credit / Cr. Debit / Dr. Credit / Cr.

Normal Balance Normal Balance

Chapter Chapter
3-23 3-24

Assets – Debits should exceed credits.

Liabilities – Credits should exceed debits.

Normal balance is on the increase side.


The Basic Accounting Equation

ASSETS LIABILITIES EQUITY

Asset must equal the sum of liabilities and equity


Asset are resources a business owns.
Liabilities are claims against assets
Equity is the ownership claim on total assets.
Expanded Accounting Equation

Expanded Accounting Equation

Source : Weygandt,Kimmel,Kieso, (2013), Financial Accounting IFRS


Edition, 2nd edition, John Wiley and Sons Inc., New Jersey, Page 15
DEBITS AND CREDITS

Source : Weygandt,Kimmel,Kieso, (2013), Financial Accounting IFRS


Edition, 2nd edition, John Wiley and Sons Inc., New Jersey,
DEBITS AND CREDITS

Source : Weygandt,Kimmel,Kieso, (2013), Financial Accounting IFRS


Edition, 2nd edition, John Wiley and Sons Inc., New Jersey,
THE ACCOUNTING CYCLE

1. Analyze Business Transactions

9. Prepare a post-closing trial 2. Journalize the Transactions


balance

8. Journalize and Post Closing 3. Post to Ledger Accounts


Entries
4. Prepare a Trial Balance
7. Prepare Financial Statements

5. Journalize and Post Adjusting


6. Prepare an Adjusted Trial Entries
Balance

IF a worksheet is prepared, Steps 4,5 and 6 are incorporate in the worksheet.


IF Reversing entries are prepared, they occur between Steps 9 and 1.
Source: Weygandt,Kimmel,Kieso, (2013), Page 171
RECORDING STEPS
Follow these steps:
1. Determine what
type of account is
involved.
2. Determine what
items increased
or decreased and
by how much.
3. Translate the
increases and
decreases into
debits and
credits.
TRIAL BALANCE

Is a list of accounts and


Trial Balance their balances at a
given time.

The primary purpose of


a trial balance is to
prove (check) that the
debits equal the credits
after posting.
TRIAL BALANCE

Limitations of a Trial Balance


The trial balance may balance even when

1. a transaction is not journalized,

2. a correct journal entry is not posted,

3. a journal entry is posted twice,

4. incorrect accounts are used in journalizing or posting, or

5. offsetting errors are made in recording the amount of a


transaction.
Types of Adjusting Entries

Deferrals Accruals
Prepaid Expenses
Accrued Revenue
Expenses paid in cash
and recorded as Revenues earned but not
assets before they are yet received in cash or
used or consumed recorded.

Unearned Revenues.
Revenues received in Accrued Expenses.
cash and recorded as Expenses incurred but
liabilities before they are not yet paid in cash or
earned. recorded.
Adjusting Entries for Defferals

Summary

Source : Weygandt,Kimmel,Kieso, (2013), Financial Accounting IFRS


Edition, 2nd edition, John Wiley and Sons Inc., New Jersey, page 104
Adjusting Entries for Defferals

Summary

Source : Weygandt,Kimmel,Kieso, (2013), Financial Accounting IFRS


Edition, 2nd edition, John Wiley and Sons Inc., New Jersey, page 106
Adjusting Entries for Accruals

Summary

Source : Weygandt,Kimmel,Kieso, (2013), Financial Accounting IFRS


Edition, 2nd edition, John Wiley and Sons Inc., New Jersey, page 111
Adjusting Entries for Accruals

Summary

Source : Weygandt,Kimmel,Kieso, (2013), Financial Accounting IFRS


Edition, 2nd edition, John Wiley and Sons Inc., New Jersey, page 108
The Adjusted Trial Balance
Its purpose is to prove the equality of debit balances and credit balances in the
ledger. Illustration 3-24
Adjusted trial balance

After all adjusting entries are


journalized and posted the company
prepares another trial balance from
the ledger accounts (Adjusted Trial
Balance).

Source : Weygandt,Kimmel,Kieso,
(2013), Financial Accounting IFRS
Edition, 2nd edition, John Wiley and
Sons Inc., New Jersey, Page 114
Week 1
Introduction to Financial
Statements and Other
Financial Reporting Topics
Financial Accounting, IFRS 2nd Edition
Weygandt ● Kimmel ● Kieso

Prepared by : Mohammad Alvin, SE, MM


Forms of Business Entities
The Financial Statements

• Income statement
• Statement of stockholders’ equity
• Balance sheet
• Statement of cash flows
• Support for the financial statements is
provided by notes
The Adjusted Trial Balance

Financial Statements are prepared directly from the


Adjusted Trial Balance.

Statement Retained
Income
of Financial Earnings
Statement
Position Statement
PREPARING FINANCIAL STATEMENT

Illustration 3-25
Preparation of the income
statement and retained
earnings statement from
the adjusted trial balance

Source :
Weygandt,Kimmel,Kieso,
(2013), Financial
Accounting IFRS Edition,
2nd edition, John Wiley
and Sons Inc., New Jersey,
Page 115
PREPARING FINANCIAL STATEMENT

Illustration 3-25

Source :
Weygandt,Kimmel,Kieso,
(2013), Financial
Accounting IFRS Edition,
2nd edition, John Wiley
and Sons Inc., New Jersey,
Page 116
EQUITY RELATIONSHIP
CLASSIFICATION OF CASH FLOWS

Statement of
Cash Flows

Operating Investing Financing


activities activities activities

Three Sources of Information:


1. Comparative balance sheets

2. Current income statement

3. Additional information
FORMAT OF STATEMENT OF CASH FLOWS

Format of the Statement of Cash Flows

Order of Presentation: Direct Method


1. Operating activities.
Indirect Method
2. Investing activities.

3. Financing activities.

Companies favor the indirect method for two reasons:


1. Easier and less costly to prepare, and

2. Focuses on the differences between net income and net cash


flow from operating activities.
TEMPORARY VS PERMANENT ACCOUNTS
CLOSING THE BOOKS
At the end of the accounting period, the company makes the
accounts ready for the next period. This is called closing the
books.

Temporary Permanent
All Revenue All Asset
Accounts Accounts
Temporary Accounts
relate only to given
accounting period All Expense All Liability
Accounts Accounts
Permanent Accounts
relate to one or more
future accounting periods.
Dividends Equity
CLOSING THE BOOKS

Note:
Dividends are closed directly
to retained earnings and not
to Income Summary because
dividends are not an
expense.
POST-CLOSING TRIAL BALANCE

The purpose of the post-closing trial balance is


to prove the equality of the permanent account
balances after journalizing and posting of
closing entries.

The post-closing trial balance will contain only


permanent – statement of financial position-
accounts
AUDITOR’S OPINION

• Audit is conducted by CPAs


• The audit report is the formal
statement of audit opinion
– Unqualified opinion
– Qualified opinion
– Adverse opinion
– Disclaimer of opinion
AUDITOR’S OPINION

Unqualified Opinion
• The financial statements present fairly
– The financial position
– Results of operations
– Cash flows
• In conformity with generally accepted
accounting principles
• For the user: the highest degree of reliability
AUDITOR’S OPINION
Qualified Opinion
• Except for the matter to which the exception
relates
• The financial statements present fairly
– The financial position
– Results of operations
– Cash flows
• In conformity with generally accepted accounting
principles
• For the user: determine the significance of the
exception
AUDITOR’S OPINION

Adverse Opinion
• The financial statements do not present fairly
– The financial position
– Results of operations
– Cash flows
• In conformity with generally accepted
accounting principles
• For the user: reliability of financial statements
need to be seriously questioned
AUDITOR’S OPINION

Disclaimer of Opinion
• The auditor does not express an opinion
• Auditor
– Has not preformed an audit sufficient in scope to
form an opinion or
– Is not independent
• For the user: auditor’s statement conveys no
indication of financial statement reliability
Week 2

Balance Sheet and


Income Statement
Financial Accounting, IFRS 2nd Edition
Weygandt ● Kimmel ● Kieso

Prepared by : Mohammad Alvin, SE, MM


STATEMENTS OF FINANCIAL POSITION
(BALANCE SHEET)

ASSETS
• Probable future economic benefits obtained or
controlled by an entity as a result of past
transactions or events
– Current Assets – operating cycle or one year which
ever is longer to convert or conserve cash.
– Long-Term (noncurrent) assets – take longer than
one year or operating cycle to convert or conserve
cash.
ASSETS
CURRENT ASSETS
• Cash and assets that will be converted into cash during
the operating cycle or within a year, whichever is longer
• Presented in order of liquidity
– Cash
– Marketable Securities
– Accounts Receivable
– Other receivables due from nontrade sources
– Inventories
– Prepaid
ASSETS

Long-Term Assets: Tangible


• Land
• Buildings
• Machinery
• Construction in Progress
– Assets under construction
– Transferred to permanent asset account upon completion
• Accumulated Depreciation
– Straight-Line Method
– Declining-Balance Method
– Sum-of-the-Years’-Digits Method
– Units-of-Production Method
ASSETS

Long-Term Assets: Leases


Long-Term Assets: Leases
• Capital lease
– In-substance ownership
– Recorded as an long term asset net of amortization
– Operating lease if not a Capital lease
Not recorded as asset and lease payments are expensed

Long-Term Assets: Investments


– Debt or equity securities
– Equity securities
ASSETS

Long-Term Assets: Intangibles


• Goodwill
– Purchase of a business where price paid exceeds the fair value of net assets
– U.S. GAAP: not amortized; test annually for impairment
• Patents
– 20 years
– Amortized over shorter of legal or useful life
• Trademarks
– Indefinite legal life
– Not amortized; test annually for impairment
• Franchises
– Life based on contract
– Amortize over shorter of legal or useful life
• Copyrights
– Life of the creator plus 70 years
– Amortize over shorter of legal or useful life
STATEMENTS OF FINANCIAL POSITION
LIABILITIES
(BALANCE SHEET)

LIABILITIES
• Probable future sacrifices of economic
benefits arising from present obligations of a
particular entity to transfer assets or provide
services to other entities in the futures as a
result of past transactions or events.
– Current Liabilities
– Long-Term Liabilities
LIABILITIES

CURRENT LIABILITIES
• Obligations whose liquidation is reasonably
expected to
• Require the use of
– Existing current assets
– Creation of other current liabilities
• Within one year or the operating cycle,
whichever is longer
LIABILITIES
CURRENT LIABILITIES (Cont’d)
• Payables
– Short-term obligations created by the
acquisition of goods or services
• Unearned Income
– Payments collected in advance of the
performance of services or delivery of goods
• Other current liabilities
– As circumstances warrant
LIABILITIES

LONG TERM LIABILITIES


• Due in a period beyond one year or
operating cycle
• Related to
– Financing arrangements
– Operational obligations
LIABILITIES

Long-Term Liabilities: Financing Arrangements


• Notes Payable
– Secured by property: Mortgage notes
• Credit Agreements
– Ready lines of credit that may require a compensating balance
– Not a liability until funds are drawn
• Bonds Payable
– Sold at par, premium, or discount
– Premium or discount is amortized into interest expense
– Bond carrying value is amortized to par value
– Convertible bonds can be converted into common stock
– Conversion feature enhances bond selling price
LIABILITIES

Long-Term Liabilities: Operational Obligations

• Deferred Taxes
Difference between accounting and tax methods
• Warranty Obligations
• Non controlling Interest (was minority interest)
• Other Noncurrent Liabilities
• Redeemable Preferred stock
STATEMENTS OF FINANCIAL POSITION
(BALANCE SHEET)

STOCKHOLDER’S EQUITY
• The residual ownership interest in the
assets of an entity that remains after
deducting its liabilities
– Paid-in Capital
– Additional paid-in capital
– Retained Earnings
IFRS Balance Sheet Format

• Asset section = Usually noncurrent assets are


presented first, followed by current assets.

• Liabilities and Owner’s Equity section =


Capital and reserves are presented first
followed by noncurrent liabilities and then
current liabilities.
INCOME STATEMENTS

• Dated for a period of time


– For the Year Ended...
• Multiple-step format
– Gross profit
– Operating income
– Income before taxes
– Net income
• Single-step format
– Total of all revenues and gains
– Less the total of all expenses and losses
SPECIAL INCOME STATEMENTS ITEMS

• Unusual or Infrequent Items Disclosed


Separately
• Equity in Earnings of Nonconsolidated
Subsidiaries
• Discontinued Operations
• Extraordinary Items
• Cumulative Effect of a Change in Accounting
Principle
• Minority Share of Earnings
INCOME STATEMENTS IFRS VS GAAP

Income Statements are similar with some


presentation differences
• IFRS has no required format of the
Income Statement.
• IFRS equipment may be revalued which
has impact on depreciation expense
• IFRS allows for alternative performance
measures to be presented in Income
Statement
Week 3

Statement
of Cash Flows
Financial Accounting, IFRS 2nd Edition
Weygandt ● Kimmel ● Kieso

Prepared by : Mohammad Alvin, SE, MM


STATEMENT USERS

• Internal (management) users


– Determine dividend policy
– Evaluate cash generated by operations
– Review investing and financing policy
• External users
– Assess firm’s ability to increase dividends
– Assess firm’s ability to pay debt from operations
– Assess firm’s relationship of cash from operations
to in relation to the cash from financing
STATEMENT STRUCTURE

Cash flows from operations


+ Cash flows from investing activities
+ Cash flows from financing activities
= Change in cash
+ Beginning cash balance
= Ending cash balance

Supplemental disclosure: non-cash financing


and investing activities
CLASSIFICATION OF CASH FLOWS

Statement of
Cash Flows

Operating Investing Financing


activities activities activity

Three Sources of Information:


1. Comparative balance sheets

2. Current income statement

3. Additional information
FORMAT OF STATEMENT OF CASH FLOWS

Format of the Statement of Cash Flows

Order of Presentation: Direct Method


1. Operating activities.
Indirect Method
2. Investing activities.

3. Financing activities.

Companies favor the indirect method for two reasons:


1. Easier and less costly to prepare, and

2. Focuses on the differences between net income and net cash


flow from operating activities.
PREPARING THE STATEMENT OF CASH FLOWS

Illustration 13-4
Operating Activities – Indirect Method

Summary of Conversion to Net Cash Provided


by Operating Activities—Indirect Method
Illustration 13-12
INVESTING & FINANCING ACTIVITIES

ANALYZE CHANGES IN NON CURRENT ASSET


AND LIABILITY ACCOUNTS AND RECORD AS
INVESTING & FINANCING ACTIVITIES, OR
DISCLOSE AS NON CASH TRANSACTIONS.
Sebagai contoh :
 Changes in Land
 Changes in Buildings
 Changes in Equipment
 Changes in Bonds payable
 Changes in Share Capital – ordinary
 Changes in Retained Earnings
NON CASH ACTIVITIES

Significant Non-Cash Activities


1. Direct issuance of ordinary shares to purchase assets.
2. Conversion of bonds into ordinary shares.
3. Direct issuance of debt to purchase assets.
4. Exchanges of plant assets.

Companies report non-cash activities in either a


 separate note or

 supplementary schedule to the financial statements.


EXAMPLE
PT ABC
PT ABC
Comparative Statements of Financial Position
December 31 Income Statement
For the Year Ended December 31, 2014
Assets 2014 2013
Equipment € 60,000 € 78,000
Accumulated depreciation - equipment (29,000) (24,000)
Sales Revenue € 242,000
Inventory 30,000 20,000
Accounts Receivable 33,000 14,000 Cost of Goods Sold 175,000
Cash 37,000 20,000 Gross Profit 67,000
Total € 131,000 € 108,000
Operating expenses 24,000
Equity and Liabilities Income from operations 43,000
Share capital – ordinary € 18,000 € 14,000
Retained Earnings 50,000 38,000 Interest expense 3,000
Bonds payable 27,000 33,000 Income before income taxes 40,000
Accounts payable 29,000 15,000
Income tax expense 8,000
Income taxes payable 7,000 8,000
Total € 131,000 € 108,000 Net Income € 32,000
Informasi tambahan :
1. Depreciation expense sebesar € 13,300
2. Dividends declared and paid sebesar € 20,000
3. Selama tahun berjalan, equipment dijual sebesar € 9,700 cash.
Diketahui bahwa Equipment tersebut memiliki cost € 18,000 dan accumulated depreciation € 8,300 pada saat dijual.
PT ABC
Statements of Cash Flows (Indirect Method)
For the Year Ended December 31, 2014

Cash flows from operating activities


Net Income € 32,000
Adjustments to reconcile net income
to net cash provided by operating activities :
Depreciation expense € 13,300
Increase in Accounts Receivable (19,000)
Increase in Inventory (10,000)
Increase in Accounts Payable 14,000
Decrease in Income taxes payable (1,000) (2,700)
Net cash provided by operating activities € 29,300
Cash flows from investing activities
Sale of equipment 9,700
Cash flows from financing activities
Issuance of ordinary shares 4,000
Redemption of bonds (6,000)
Payment of dividends (20,000)
Net cash used by financing activities (22,000)
Net increase in cash 17,000
Cash at beginning of period 20,000
Cash at ending of period € 37,000
Operating Activities – Direct Method
Operating Activities – Direct Method
EXAMPLE
PT ABC PT ABC
Comparative Statements of Financial Position
Income Statement
December 31
For the Year Ended December 31, 2014
Assets 2014 2013
Equipment € 60,000 € 78,000
Accumulated depreciation - equipment (29,000) (24,000)
Inventory 30,000 20,000
Sales Revenue € 242,000
Accounts Receivable 33,000 14,000
Cash 37,000 20,000 Cost of Goods Sold 175,000
Total € 131,000 € 108,000 Gross Profit 67,000
Operating expenses 24,000
Equity and Liabilities
Share capital – ordinary € 18,000 € 14,000 Income from operations 43,000
Retained Earnings 50,000 38,000 Interest expense 3,000
Bonds payable 27,000 33,000 Income before income taxes 40,000
Accounts payable 29,000 15,000
Income taxes payable 7,000 8,000 Income tax expense 8,000
Total € 131,000 € 108,000 Net Income € 32,000
Informasi tambahan :
1. Depreciation expense sebesar € 13,300
2. Dividends declared and paid sebesar € 20,000
3. Selama tahun berjalan, equipment dijual sebesar € 9,700 cash.
Diketahui bahwa Equipment tersebut memiliki cost € 18,000 dan accumulated depreciation € 8,300 pada saat dijual.
4. Account payable pertain to merchandise suppliers.
5. Semua operating expenses selain depreciation dibayar dengan cash.
6. Semua depreciation expenses dimasukkan ke operating expenses.
7. Semua penjualan (sales) dan pembelian (purchases) are on account.
SOLUTION
a. Cash receipts from customers
Sales Revenue € 242,000
Deduct : Increase in Accounts Receivable 19,000
Cash receipts from customers € 223,000
b. Cash payments to suppliers
Cost of Goods Sold € 175,000
Add : Increase in inventory 10,000
Cost of purchases 185,000
Deduct : Increase in accounts payable 14,000
Cash payments to suppliers € 171,000
c. Cash payments for operating expenses
Operating expenses € 24,000
Deduct : Depreciation expenses 13,300
Cash payments for operating expenses € 10,700
d. Cash payments for income taxes
Income tax expense € 8,000
Add : Decrease on income taxes payable 1,000
Cash payments for income taxes € 9,000
SOLUTION
PT ABC
Statements of Cash Flows (Direct Method)
For the Year Ended December 31, 2014

Cash flows from operating activities


Cash Receipts from customers € 223,000
Less cash payments :
To Suppliers € 171,000
For operating expenses 10,700
For Income taxes 9,000
For Interest 3,000 193,700
Net cash provided by operating activities € 29,300
Cash flows from investing activities
Sale of equipment 9,700
Cash flows from financing activities
Issuance of ordinary shares 4,000
Redemption of bonds (6,000)
Payment of dividends (20,000)
Net cash used by financing activities (22,000)
Net increase in cash 17,000
Cash at beginning of period 20,000
Cash at ending of period € 37,000
Week 4

Sustainability
Reporting
Financial Accounting, IFRS 2nd Edition
Weygandt ● Kimmel ● Kieso

Prepared by : Mohammad Alvin, SE, MM


WHAT IS SUSTAINABILITY REPORTING

SUSTAINABILITY REPORTING adalah..


- Laporan yang dipublikasi oleh perusahaan atau organisasi
mengenai dampak ekonomi, lingkungan alam dan sosial yang
dikarenakan aktivitas setiap hari.

- Merupakan praktek dari perhitungan dan diperhitungkan untuk


stakeholder internal dan eksternal untuk kinerja organisasi yang
berhubungan dengan tujuan dari sustainable development.

- Merupakan representasi dari nilai perusahaan dan model tata


kelola, dan mendemonstrasikan hubungan antara strategi yang
digunakan dan komitmen atas keberlangsungan ekonomi global.
MEKANISME PENYAJIAN SUSTAINABILITY
REPORTING
Sustainability Reporting VS Financial Report

Bottom Lines National International


Standards & References
Setter Body
Financial - Balance Sheet Financial Accounting International Financial
Reporting Standards. Reporting Standards
- Income statement
Setter : IAI Setter: IFRS
-- Mandatory

Sustainability - Environmental Sustainability Reporting Sustainability Reporting


Reporting Guidelines. Guidelines
- Social, and
Setter: NCS Setter: GRI based in the
- Economic Netherlands since 2000
-- Voluntary / performances
-- Mandatory
Component of Sustainability Reporting

Human Rights
Principle 1: Businesses should support and respect the protection of
internationally proclaimed human rights
Principle 2: Make sure that they are not complicit in human rights
abuses

Labor
Principle 3: Businesses should uphold the freedom of association
and the effective recognition of the right to collective bargaining
Principle 4: The elimination of all forms of forced and compulsory
labor
Principle 5: The effective abolition of child labor
Principle 6: The elimination of discrimination in respect of
employment and occupation
Component of Sustainability Reporting

Environment
Principle 7: Businesses should support a precautionary approach to
environmental challenges
Principle 8: Undertake initiatives to promote greater environmental
responsibility
Principle 9: Encourage the development and diffusion of
environmentally friendly technologies

Anti-Corruption
Principle 10: Businesses should work against corruption in all its
forms, including extortion and bribery
Week 5

Basics Of
Analysis
Financial Accounting, IFRS 2nd Edition
Weygandt ● Kimmel ● Kieso

Prepared by : Mohammad Alvin, SE, MM


WHY DO ANALYSIS ?

Laporan keuangan akan menjadi lebih bermanfaat untuk


pengambilan keputusan ekonomi, apabila dengan
informasi laporan keuangan tersebut dapat diprediksi
apa yang akan terjadi di masa mendatang.

Dengan mengolah lebih lanjut laporan keuangan melalui


proses pembandingan, evaluasi dan analisis trend, akan
diperoleh prediksi tentang apa yang mungkin akan
terjadi dimasa mendatang.

Disinilah arti pentingnya suatu analisis terhadap laporan


keuangan.
ANALYSIS TOOLS

ANALISA PROSES
LAPORAN
LAPORAN PENGAMBILAN
KEUANGAN
KEUANGAN KEPUTUSAN

RATIO
RATIO LIQUIDITY
ANALYSIS

RATIO
PROFITABILITY
HORIZONTAL TREND
ANALYSIS ANALYSIS
RATIO
SOLVABILITY
VERTICAL
ANALYSIS
RATIO ANALYSIS

Ratio analysis expresses the relationship among


selected items of financial statement data.

Financial Ratio Classifications :


Measures short-term ability of the company
Liquidity to pay its maturing obligations and to meet
unexpected needs for cash.

Profitability Measures the income or operating success of


a company for a given period of time.

Measures the ability of the company to


Solvency survive over a long period of time.
RATIO ANALYSIS Liquidity

Illustration 14-27
Summary of liquidity ratios
RATIO ANALYSIS Profitability

Illustration 14-27
Summary of profitability ratios
RATIO ANALYSIS Solvency

Illustration 14-27
Summary of solvency ratios
VERTICAL ANALYSIS

Vertical analysis, also called common-size


analysis
 Expresses each financial statement item as a percent of a
base amount.

 For example, selling expenses could be expressed as 16%


of net sales.

 Commonly applied to the statement of financial position


and the income statement.
VERTICAL ANALYSIS

Melcher Company
Income Statement
For the Years Ended December 31
2009 2008 2007
Sales revenue $ 100,000 100.0% $ 95,000 100.0% $91,000 100.0%
Cost of goods sold 65,000 65.0% 60,800 64.0% 56,420 62.0%
Gross profit 35,000 35.0% 34,200 36.0% 34,580 38.0%
Operating expenses:
Selling expense 14,000 14.0% 11,400 12.0% 10,000 11.0%
General expense 16,000 16.0% 15,200 16.0% 13,650 15.0%
Total operating expense 30,000 30.0% 26,600 28.0% 23,650 26.0%
Operating Income before taxes 5,000 5.0% 7,600 8.0% 10,930 12.0%
Taxes related to operations 1,500 1.5% 2,280 2.4% 3,279 3.6%
Net Income $ 3,500 3.5% $ 5,320 5.6% $ 7,651 8.4%

Each financial statement element is presented as a percentage of a


designated base which is sales revenue on the Income Statement.
HORIZONTAL ANALYSIS

Horizontal analysis, also called trend analysis

 Technique for evaluating a series of financial statement


data over a period of time.

 Purpose is to determine the increase or decrease that has


taken place.

 Commonly applied to the statement of financial position,


income statement, and statement of retained earnings.
HORIZONTAL ANALYSIS

Melcher Company
Income Statement
For the Years Ended December 31
2009 2008 2007 2009 2008 2007
Sales revenue $ 100,000 $ 95,000 $ 91,000 109.9% 104.4% 100.0%
Cost of goods sold 65,000 60,800 56,420 115.2% 107.8% 100.0%
Gross profit 35,000 34,200 34,580 101.2% 98.9% 100.0%
Operating expenses:
Selling expense 14,000 11,400 10,000 140.0% 114.0% 100.0%
General expense 16,000 15,200 13,650 117.2% 111.4% 100.0%
Total operating expense 30,000 26,600 23,650 126.8% 112.5% 100.0%
Operating Income before taxes 5,000 7,600 10,930 45.7% 69.5% 100.0%
Taxes related to operations 1,500 2,280 3,279 45.7% 69.5% 100.0%
Net Income $ 3,500 $ 5,320 $ 7,651 45.7% 69.5% 100.0%

Each financial statement element is presented as a


percentage of a base amount from a selected year.
YEAR TO YEAR CHANGE ANALYSIS

Untuk menganalisa perubahan tahun, maka hal


berikut ini yang harus diperhatikan:
1. Item memiliki nilai yang ada pada tahun dasar
dan tidak ada pada tahun berikutnya, maka
menurun 100%.
2. Perubahan persentase yang berarti, tidak bisa
dihitung dengan satu nomor yang positif dan
lainnya negatif.
3. Tidak ada perubahan persentase yang dihitung
ketika tidak ada angka pada tahun dasar.
INDUSTRY VARIATIONS

• Financial components vary by type of industry


• Merchandising
– Inventory is a principal asset
– Sales may be primarily for cash or on credit
• Service
– Inventory is low or nonexistent
• Manufacturing
– Large inventory holdings
– Substantial investment in plant assets
THE USERS OF FINANCIAL STATEMENT

• Karyawan
• Pemberi Pinjaman
• Investor
• Pemasok dan kreditor usaha lainnya
• Pelanggan
• Masyarakat
• Pemerintah
REFERENCE

Weygandt,Kimmel,Kieso, (2013), Financial


Accounting IFRS Edition, 2nd edition, John
Wiley and Sons Inc., New Jersey

Gibson, C.H.. (2011). Financial Statement


Analysis. 12. CENGA. ISBN: 978-0-538-74957-2.
THANK YOU

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