Financial Statements and

its Elements
(Components, and Examples)

Acla, Khatlene Jane

Dayoc, BJ Mae
Ewayan, Glecyl Mae
Hernane, Shiela
Lapinig, Jessa Lyn
Definition:

Financial Statements
- are reports prepared by a company's management to
present the financial performance and position at a
point in time.
- Financial statements are often audited by government
agencies, accountants, firms, etc. to ensure accuracy and
for tax, financing, or investing purposes.  
Elements of Financial
Statements
1. Assets
- resources controlled by the enterprise as a result of past
transactions and events and from which future econom
ic benefits are expected to flow the enterprise.
- property rights of value owned by the business.

2. Liabilities
- present obligations of an enterprise arising from past
transactions or events, the settlement of which is
expected to result in an outflow from the enterprise of resources
embodying economic benefits.
3. Owner’s Equity or Capital
- is the residual interest in the assets of the enterprise after
deducting all its liabilities. The amount invested in a busines
s by its owners, plus any remaining retained earnings.
• Drawing – refers to the amount of cash or value of the property
that the owner has invested in the enterprise but later wit
hdrawn for personal use.
4. Revenue or Income
- this is an increase in assets or decrease in liabilities caused by
the provision of services or products to the customers. It is a
quantification of the gross activity generated by a
5. Expenses

- is the reduction in value of an asset as it is used to generate

revenue.
- gross outflow of economic benefits during the period arisin
g in the course of ordinary activities of an enterprise when those
outflow result in decrease in equity, other than those relat
ing to distribution to owners.
• Net Income – the excess of revenue over expenses.
• Net Loss – expenses exceeds the revenue.
Components

of
Financial
Statements
1. Statement of Financial Position or
Balance Sheet

- shows the financial condition/position of a business as

of a given period.
- consists of the Assets, Liabilities, and Capital (OE).
 Report Form
Account Form
2. Statement of Comprehensive
Income or Income Statement

- shows the result of the operations for a given

period.
- consists of the Revenue, Cost and Expenses.
3. Statement of Changes in Equity

- shows the changes in the capital or owner’s equity

as a result of additional investments or withdrawal by
the owner, plus or minus the net income or net loss
for the year.
4. Statement of Cash Flows

- summarizes the cash receipts and cash disbursemen

t for the accounting period.
- summarizes the cash activities of the business by
classifying cash inflows and cash outflows into operati
ng, investing and financing activities.
Direct Indirect Method
Method