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Financial Statement Preparation

The document discusses key aspects of preparing financial statements including their objectives, required components, presentation, current/non-current distinction, income statement, statement of owner's equity, balance sheet, and statement of cash flows. Financial statements provide information to accountability and decision making, and a complete set includes statements of financial position, financial performance, changes in net assets/equity, and cash flows along with comparative information and notes.

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DELFIN, LORENA D.
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45 views

Financial Statement Preparation

The document discusses key aspects of preparing financial statements including their objectives, required components, presentation, current/non-current distinction, income statement, statement of owner's equity, balance sheet, and statement of cash flows. Financial statements provide information to accountability and decision making, and a complete set includes statements of financial position, financial performance, changes in net assets/equity, and cash flows along with comparative information and notes.

Uploaded by

DELFIN, LORENA D.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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PREPARATION OF

Your Subtitle
FINANCIAL STATEMENT
Objectives of Financial
Statements
• To meet information needs of service recipients and resource providers
for accountability and decision making
• Users need information about:
– The performance of the entity e.g. meeting
service delivery and other operating and financial
objectives;
– Managing resources it is responsible for
– Complying with legislative & other authority
– Liquidity and solvency
– Sustainability of service delivery and other
operations
– Capacity to adapt to changing circumstances
A complete set of financial
statements includes:
• Statement of financial position
• Statement of financial performance
• Statement of changes in net assets/equity
• Cash flow statement
I. Comparison of budget and actual amounts
II. Notes
III. Comparative information in respect of the
preceeding period
Presentation and Disclosure
• Consistency of presentation and classification
in financial statements is retained unless
• Another is more appropriate
• An IPSAS requires a change
• If changed, comparative amounts reclassified
• Disclosure for reclassified items or classes of
item
• Disclosure on face of statements or in notes
IPSAS – International Publis Sector Accounting Standard
Current/Non-current Distinction
• Statement of financial position presents
current and non-current assets and liabilities
separately
• Current asset is cash or cash equivalents or
item expected to be realized within twelve
months after the reporting date
• Current liability is expected to be settled
within twelve months after the reporting date
Income Statement
• Covers a period of time Income Statement
Revenue ₱120,000
• Summarizes revenues Expenses (100,000)
and expenses Net Income ₱ 20,000

• Reports net income


• Excess of revenues over
expense
• Net income increases
retained earnings (B/S)
• Net Loss will decrease
retained earnings (B/S)
Statement of OWNER’S EQUITY
• Covers a specific period Income Statement
of time Revenue $ 120,000
Expenses (100,000)
• Reconciles beginning Net Income $ 20,000
and ending balances of Statement of Owners' Equity
the owners' equity Capt. Stk. Ret. Earn.
accounts Beginning Balance $20,000 $ 5,000
Net income 20,000
A. Capital Stock Dividends (10,000)
Ending Balance $20,000 $ 15,000
B. Retained Earnings
C. Etc.
• Links the income
statement and the
balance sheet
Balance Sheet
• Shows the financial condition of
an entity as of a particular date
• Assets: the resources of the
business
• Liabilities: the debts of the
business
• Equity: the owners’ interest in
the business
• The Accounting Equation:
Assets =Liabilities + Owners’ Equity
Statement of Cash Flows
• Covers the same period as the income
statement
• Three sections:
Cash flows from operating activities
Cash flows from investing activities
– Buying and selling assets
Cash flows from financing activities
– Financing cash from banks and dividends

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