Chapter 1: Financial Statements Flashcards Preview

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Flashcards in Chapter 1: Financial Statements Deck (12)
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1

4 types of Financial Statements

1. Financial position (balance sheet)
2. Income
3. Changes in equity
4. Cash flows

2

Balance sheet reports three items:

Assets, liabilities and shareholders equity

3

Assets divided into two categories:

1. non-current assets - assets will not be sold, consumed or converted into money during the next year
2. current assets - expected to be sold, consumed or converted into money within 1 year or production cycle

4

Liabilities into two categories:

1. non-current liabilities - assure outflow of economic benefits in more than a year
2. current liabilities - expected to be redeemed within 1 year

5

Shareholders equity consists of:

Share capital - money invested by shareholders
Retained earnings - capital retained within company

6

First accounting formula:

Assets = Liabilities + Shareholder's Equity

7

Income statement

Reports revenues and expenses of an organisation for a time period
Result - net income or net loss

8

Income statement order

Sales
Cost of sales
1. Gross profit
R&D expenses
Selling, general and administrative expenses
Other operating expenses
2. Operating profit
Finance income and expense
3. Profit before income tax
Income tax expense
4. Net profit

9

Statement of Other Comprehensive Income

Presents overview of unrealised company results. Other changes in values, not accountable to equity also taken into account

10

Second accounting formula:

Reveues - Expenses = Net Income
+- Other comprehensive income = Total comprehensive income

11

Statement of Changes in Equity

Repurchasing of shares and dividend payouts, transactions between organisation and shareholders

12

Statement of Cash Flows reports cash flow of:

1. Operating activities
2. Investing activities
3. Financing activities