Financial Statements: Contents of Financial Statements
Arjun EP
Meaning of Financial Statements
The summary of detailed information about financial position and performances of a business firm is known as the financial statement.
The financial statements are prepared at the end of accounting period.
The purpose for preparing financial statement is for the periodical review of the activities of the organization and results achieved by the organization.
It includes profit and loss account or income statement and balance sheet.
The income statement also may include manufacturing and trading account.
Profit and loss account indicates operation results of for a particular period.
Balance sheet indicates the financial position regarding assets, liabilities and capital.
Thus, financial statements are the strong form of accounting.
Contents of Financial Statements
The main contents of financial statements are:
1. Income statement
2. Retained earnings account
3. Balance sheet
4. Cash flow statement
Income Statement
An income statement shows the net result of the business operations during an accounting period.
It may include manufacturing account, trading account, profit and loss account, profit and loss appropriation account.
Income statement presents the summary of revenues, expenses and net income or net loss of a firm.
It serves as a profitability measure of the firm.
The amount received from operating activities is known as revenue income.
It is the income earned from goods selling or services provide.
It also includes received of discount, commission, interest, transfer fees etc.
Expenditure is incurred for the running productivity or earning capacity of a business.
Such expenditure yields benefits in current accounting period.
Income Statement
|
Particulars |
Amount |
Amount |
|
|
Sales (net) |
|
10,00,000 |
|
|
Add: Other income |
|
Nil |
|
|
Less: |
Cost of goods sold |
|
4,50,000 |
|
|
Gross margin |
|
6,50,000 |
|
Less: |
Operating expenses: |
|
|
|
|
Wages paid |
1,50,000 |
|
|
|
Operating expenses other than depreciation |
1,00,000 |
|
|
|
Depreciation on plant and machinery |
1,00,000 |
|
|
|
Loss on sale of plant (book value 60,000) |
10,000 |
|
|
|
Provision for taxation |
80,000 |
4,40,000 |
|
|
Net income |
|
1,10,000 |
|
Add: |
Profit on sale of investment |
|
70,000 |
|
|
Net income |
|
1,80,000 |
###########
|
Click on link for YouTube videos: |
|
|
Accounting Equation |
|
|
Basic Journal Entries in Nepali |
|
|
Basic Journal Entries |
|
|
Journal Entry and Ledger |
|
|
Ledger |
|
|
Subsidiary Book |
|
|
Cash Book |
|
|
Trial Balance & Adjusted Trial Balance |
|
|
Bank Reconciliation Statement (BRS) |
|
|
Depreciation |
|
|
Final Accounts: Class 11 |
|
|
Adjustment in Final Accounts |
|
|
Capital and Revenue |
|
|
Single Entry System |
|
|
Non-Trading Concern |
|
|
Government Accounting |
|
|
Goswara Voucher (Journal Voucher) |
|
###########
Retained Earnings Account
Generally, it is prepared from accumulated profit and reserve of previous year to find out dividend paid for the year.
It is similar to profit and loss appropriation account.
It is prepared after preparation of profit and loss account.
It is prepared for distribution of net profit amount into different purposes.
This statement is prepared to show the decision made by the board of directors regarding distribution of dividend to shareholders, bonus shares issued to shareholders.
Board of directors keeps certain part of net profit amount to different general reserves and capital reserves.
This statement is also prepared to adjust provisions and expenses of previous accounting year.
These expenses are readjustment of reserve fund amount, provision for tax etc.
Company Act does not specify for the preparation of profit and loss account.
Retained Earnings Account
|
Particulars |
Amount |
Particulars |
Amount |
|
To Dividend Paid |
1,00,000 |
By Beginning Balance |
1,10,000 |
|
To General reserve |
40,000 |
By P & L Account |
1,80,000 |
|
To Capital reserve |
60,000 |
|
|
|
To Ending Balance |
90,000 |
|
|
|
|
2,90,000 |
|
2,90,000 |
Balance Sheet
Balance sheet is not an account; it is a statement of assets and liabilities of a business organization at an accounting period.
It is a statement summarizing the financial position of firm.
The balance sheet is prepared at the end or accounting period.
It is prepared after preparation income statement (manufacturing account, trading, profit and loss account).
It is the statement of balances of ledger account, which are not included in income statement.
Therefore, it is called the balance sheet.
The balance sheet contains assets and liabilities.
Liabilities refer to the financial obligation of a business organization.
Assets refer to tangible or intangible rights owned by an organization.
Comparative Balance Sheet
ABC Company Ltd
|
Liabilities |
2019 |
2020 |
Assets |
2019 |
2020 |
|
Equity share @ Rs 100 |
10,00,000 |
1,500,000 |
Plant and Machinery |
7,70,000 |
15,40,000 |
|
Share premium |
1,00,000 |
150,000 |
Investment |
3,00,000 |
2,00,000 |
|
10% Debenture |
1,00,000 |
200,000 |
Inventories |
1,50,000 |
2,00,000 |
|
Accounts payable |
1,00,000 |
80,000 |
Accounts receivable |
2,00,000 |
1,50,000 |
|
Accrued wages |
10,000 |
20,000 |
Prepaid expenses |
30,000 |
10,000 |
|
Provision of taxation |
80,000 |
60,000 |
Cash at bank |
50,000 |
1,00,000 |
|
Profit and loss |
1,10,000 |
190,000 |
|
|
|
|
|
15,00,000 |
2,200,000 |
|
15,00,000 |
22,00,000 |
#####
|
Click on link for YouTube videos |
|
|
Accounting for Share |
|
|
Share in Nepali |
|
|
Debentures |
|
|
Final Accounts: Class 12 |
|
|
Final Accounts in Nepali |
|
|
Work Sheet |
|
|
Ratio Analysis (Accounting Ratio) |
|
|
Fund Flow Statement |
|
|
Cash Flow Statement |
|
|
Theory Accounting Xii |
|
|
Theory: Cost Accounting |
|
|
Cost Accounting |
|
|
LIFO−FIFO |
|
|
Cost Sheet, Unit Costing |
|
|
Cost Reconciliation Statement |
|
#####
Cash Flow Statement
Cash flow statement is somewhat similar to fund flow statement.
The fund flow statement is based on accrual.
But, cash flow statement is based on cash.
It reports only cash transaction.
It provides information about inflow and outflow of cash.
Cash flow statement is classified into operating activities, investing activities and financing activities.
Cash Flow Statement
|
Particulars |
Amount |
Amount |
|
1 Cash from operating activities: |
|
|
|
Cash collection from sales revenue |
|
10,50,000 |
|
Cash paid to suppliers |
|
(5,20,000) |
|
Cash paid to employees and operating expenses |
|
(2,20,000) |
|
Interest and insurance paid |
|
Nil |
|
Tax paid |
|
(1,00,000) |
|
Net cash from Operating Activities [A] |
|
2,10,000 |
|
2. Cash from investing activities: |
|
|
|
Sales of plant and machinery |
|
50,000 |
|
Sales of investment |
|
1,70,000 |
|
Purchase of plant and machinery |
|
(9,30,000) |
|
Net cash from Investing Activities [B] |
|
(7,10,000) |
|
3. Cash from financing activities: |
|
– |
|
Issue of equity shares |
|
500,000 |
|
Increase in share premium |
|
50,000 |
|
Issue of debenture |
|
1,00,000 |
|
Dividend paid |
|
(1,00,000) |
|
Net cash from Financing Activities [C] |
|
5,50,000 |
|
Net change in cash and cash equivalent [A+B+C] |
|
50,000 |
***** #EPOnlineStudy *****
Thank you for investing your time.
Please comment on article.
You can help us by sharing this article at your social media platform.
Jay Google, Jay YouTube, Jay Social Media
जय गूगल, जय युट्युब, जय सोशल मिडिया
You might also like
Income Statement under NFRS | Balance Sheet under NFRS | P&S 1
Balance Sheet under NFRS | Statement of Financial Position under NFRS | Solution
Income Statement under NFRS | Profit or Loss Statement under NFRS | SOLUTION
Income Statement under NFRS | Balance Sheet under NFRS | EXPLANATION
Financial Statement under NFRS| Classification of Accounting Standards
Swar | Vyanjak | A Aa I Ee | Ka Kha Ga Gha | Ka Kaa Ki Kee | Barahkhadi | Kra Khra Gra
ABCD | British Phonetic ABCD | American Phonetic ABCD | ABCD in Devanagari
The Half-closed Eyes of the Buddha and the Slowly Sinking Sun | All Solution | NEB English Class 12 | Short Story Q&A
Comment box closed