com 2008 Student Notes for ACCA F3-Financial Accounting
Elements of Financial Statements Topic 2 accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Session Objectives Explain the main elements of financial statements Describe the purpose of financial statements Identify the main types of business transactions accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Session Objectives Describe the accounting equation Explain the matching convention and duality concept Draft simple financial statements accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting What are Financial Statements Reports that quantitatively summarize the financial status of an organization for a stated period of time. They include an income statement and balance sheet describing the flow of resources, profit or loss, and the distribution or retention of profits. accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Primary Financial Statements Balance sheet Income Statement Statement of Cash Flows accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Balance Sheet Describes where the enterprise stands at a specific date. It can be shown in two formats: Horizontal Vertical accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Example of a Horizontal Balance Sheet accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Example of a Vertical Balance Sheet accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Income Statement Depicts the revenue and expenses for a designated period of time. Net income (or net loss) is simply the difference between revenues and expenses. accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Example of Income Statement accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Statement of Cash Flows Depicts the ways cash has changed during a designated period of time. accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Balance Sheet Equation Assets Liabilities = Proprietor's Capital Horizontal format balance sheet is an expansion of this form of the accounting equation Assets = Proprietor's Capital + Liabilities accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Assets Assets are economic resources that are owned by the business and are expected to provide positive future cash flows. accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Assets accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Types of Assets Fixed Assets Any tangible or intangible asset acquired on a long-term basis to be used in providing a service to the business Not held for resale in normal course of business e.g. land and buildings, plant and machinery accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Types of Assets Current Assets Assets which are expected to be realised in the normal course of trading Disclosed in the balance sheet with least liquid asset first e.g. Stock, debtors accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Liabilities Liabilities are debts that represent negative future cash flows for the enterprise. accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Liabilities accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Types of Liabilities Long-term liabilities Payable more than 12 months after the balance sheet date e.g. loan Current liabilities Payable within 12 months of the balance sheet date e.g. creditors, bank overdraft accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Owners Equity Owners equity represents the owners claim to the assets of the business. accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Owners Equity accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Changes in Owners Equity accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Understanding Income Statement accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting The Concept of the Business Entity According to this concept, a business entity is separate from the personal affairs of its owner.. accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Revisiting Accounting Equation accountingclassroom.com 2008 Student Notes for ACCA F3-Financial Accounting Relationships Among Financial Statements