Financial Statement

Previous Lesson: Adjusted Trial Balance

End result of financial accounting is Financial Statement. It consists of income statement, statement of owners’ equity balance sheet, cash flow Statement and ending notes.

financial statement

Companies prepare four financial statements from the summarized accounting data:

Income Statement

An Income Statement presents the revenues and expenses and resulting net income or net loss for a specific period of time. It shows result of operation for a certain time period. Income statement is sometime called ‘flow statement’ or ‘period of time’ statement.

Statement of Owner’s Equity

Statement of Owner’s Equity summarizes the changes in owner’s equity for a specific period of time. In case of company this statement is also called statement of shareholder’s equity or statement of retained earnings.

Balance Sheet

Balance Sheet reports the assets, liabilities, and owner’s equity at a specific date. This statement show financial position for a specific point in time. Balance sheet also called statement of financial position or statement financial condition.

Cash Flows Statement

Cash Flow Statement Summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time, these statements provide relevant financial data for internal and external users. Cash flow statement is divided into three sections, operating activities, investing activities or financing activities.

Notes to the Financial Statement

The annual report contains the primary financial statements, notes to the financial statements and accompanying information. Notes to the financial statements are essential in amplifying and explaining the primary financial statement.

Example 1:

Prepare an Income Statement, a Retained Earnings Statement, and a Balance Sheet for the medical practice of Aftab Ahmad from the items listed below for the month of October 2017:

Retained earnings (October 1) Rs. 15,000 Common stock Rs. 30,000

Accounts payable 6,000 Equipment 29,000

Service revenue 23,000 Dividends 6,000

Supplies expense 3,500 Cash 13,000

Utilities expense 700 Supplies 2,800

Salaries and wages expense 7,000 Accounts receivable 10,000

Rent expense 2,000

Solution:

>>> Practice Financial Statement Examples.

Example 2:

Use the following accounts and information to prepare, an Income Statement, a Retained Earnings Statement, and a Balance Sheet for Usman Abdullah Industries for the month ended August 31, 2017.

Accounts payable Rs. 1,100 Dividends Rs. 3,000

Accounts receivable 5,400 Insurance expense 1,200

Buildings 63,000 Supplies 1,400

Cash 20,600 Notes payable 3,300

Service revenue 25,700 Rent expense 3,400

Common stock 52,000 Salaries expense 10,000

Retained earnings (beginning) 25,900

Solution:

>>> Practice Financial Statement Quiz 1 and Quiz 2.

[/et_pb_text][et_pb_text admin_label="Video Lecture" _builder_version="4.16" custom_margin="-1px|||||" border_width_all="10px" border_color_all="#8300e9" border_style_all="dotted" global_colors_info="{}"]

Video Lecture: Costing Concepts in Urdu & Hindi-Workbook Practice

Click Here To Download Workbook Used in Video

[/et_pb_text][/et_pb_column][et_pb_column type="1_4" _builder_version="4.16" custom_padding="|||" global_colors_info="{}" custom_padding__hover="|||"][et_pb_sidebar area="sidebar-1" _builder_version="4.16" z_index_tablet="500" remove_border="off" global_colors_info="{}"][/et_pb_sidebar][/et_pb_column][/et_pb_row][et_pb_row _builder_version="4.16" background_size="initial" background_position="top_left" background_repeat="repeat" z_index_tablet="500" global_colors_info="{}" column_structure="1_2,1_2"][et_pb_column type="1_2" _builder_version="4.16" custom_padding="|||" global_colors_info="{}" custom_padding__hover="|||"][et_pb_button button_url="https://www.accountancyknowledge.com/principles-of-accounting/" button_text="Back To Principles of Accounting" button_alignment="left" admin_label="Back (Button)" _builder_version="4.16" custom_button="on" button_icon="||divi||400" button_icon_placement="left" z_index_tablet="500" button_text_color_hover="#8300e9" button_bg_color_hover="#f4f4f4" global_colors_info="{}" button_text_size__hover_enabled="off" button_one_text_size__hover_enabled="off" button_two_text_size__hover_enabled="off" button_text_color__hover_enabled="on" button_text_color__hover="#8300e9" button_one_text_color__hover_enabled="off" button_two_text_color__hover_enabled="off" button_border_width__hover_enabled="off" button_one_border_width__hover_enabled="off" button_two_border_width__hover_enabled="off" button_border_color__hover_enabled="off" button_one_border_color__hover_enabled="off" button_two_border_color__hover_enabled="off" button_border_radius__hover_enabled="off" button_one_border_radius__hover_enabled="off" button_two_border_radius__hover_enabled="off" button_letter_spacing__hover_enabled="off" button_one_letter_spacing__hover_enabled="off" button_two_letter_spacing__hover_enabled="off" button_bg_color__hover_enabled="on" button_bg_color__hover="#f4f4f4" button_one_bg_color__hover_enabled="off" button_two_bg_color__hover_enabled="off"][/et_pb_button][/et_pb_column][et_pb_column type="1_2" _builder_version="4.16" custom_padding="|||" global_colors_info="{}" custom_padding__hover="|||"][et_pb_button button_url="https://www.accountancyknowledge.com/income-statement/" button_text="Next To Income Statement" button_alignment="left" admin_label="Next (Button)" _builder_version="4.16" custom_button="on" button_icon="||divi||400" button_icon_placement="left" z_index_tablet="500" button_text_color_hover="#8300e9" button_bg_color_hover="#f4f4f4" global_colors_info="{}" button_text_size__hover_enabled="off" button_one_text_size__hover_enabled="off" button_two_text_size__hover_enabled="off" button_text_color__hover_enabled="on" button_text_color__hover="#8300e9" button_one_text_color__hover_enabled="off" button_two_text_color__hover_enabled="off" button_border_width__hover_enabled="off" button_one_border_width__hover_enabled="off" button_two_border_width__hover_enabled="off" button_border_color__hover_enabled="off" button_one_border_color__hover_enabled="off" button_two_border_color__hover_enabled="off" button_border_radius__hover_enabled="off" button_one_border_radius__hover_enabled="off" button_two_border_radius__hover_enabled="off" button_letter_spacing__hover_enabled="off" button_one_letter_spacing__hover_enabled="off" button_two_letter_spacing__hover_enabled="off" button_bg_color__hover_enabled="on" button_bg_color__hover="#f4f4f4" button_one_bg_color__hover_enabled="off" button_two_bg_color__hover_enabled="off"][/et_pb_button][/et_pb_column][/et_pb_row][et_pb_row _builder_version="4.16" background_size="initial" background_position="top_left" background_repeat="repeat" global_colors_info="{}"][et_pb_column type="4_4" _builder_version="4.16" custom_padding="|||" global_colors_info="{}" custom_padding__hover="|||"][et_pb_divider color="#cecece" divider_position="bottom" divider_weight="2px" disabled_on="on|on|off" _builder_version="4.16" global_colors_info="{}"][/et_pb_divider][/et_pb_column][/et_pb_row][et_pb_row _builder_version="4.16" background_size="initial" background_position="top_left" background_repeat="repeat" custom_padding="0px|||||" z_index_tablet="500" global_colors_info="{}" column_structure="1_3,1_3,1_3"][et_pb_column type="1_3" _builder_version="4.16" custom_padding="|||" global_colors_info="{}" custom_padding__hover="|||"][et_pb_text admin_label="Related Topics" _builder_version="4.16" z_index_tablet="500" border_style="solid" global_colors_info="{}"]

More Interest

Adjusted Trial Balance Problems

Balance Sheet

Classified Balance Sheet

Financial Statement Problems

Financial Statement MCQs

[/et_pb_text][/et_pb_column][et_pb_column type="1_3" _builder_version="4.16" custom_padding="|||" global_colors_info="{}" custom_padding__hover="|||"][et_pb_text admin_label="Further Readings" _builder_version="4.16" z_index_tablet="500" border_style="solid" global_colors_info="{}"]

References

Mukharji, A., & Hanif, M. (2003). Financial Accounting (Vol. 1). New Delhi: Tata McGraw-Hill Publishing Co.

Narayanswami, R. (2008). Financial Accounting: A Managerial Perspective. (3rd, Ed.) New Delhi: Prentice Hall of India.

Ramchandran, N., & Kakani, R. K. (2007). Financial Accounting for Management. (2nd, Ed.) New Delhi: Tata McGraw Hill.

[/et_pb_text][/et_pb_column][/et_pb_row][et_pb_row _builder_version="4.16" background_size="initial" background_position="top_left" background_repeat="repeat" global_colors_info="{}"][et_pb_column type="4_4" _builder_version="4.16" custom_padding="|||" global_colors_info="{}" custom_padding__hover="|||"][et_pb_divider color="#cecece" divider_position="bottom" divider_weight="2px" disabled_on="on|on|off" _builder_version="4.16" global_colors_info="{}"][/et_pb_divider][et_pb_comments _builder_version="4.16" header_level="h2" header_font="||||||||" border_style="solid" button_letter_spacing_hover="0" global_colors_info="{}" button_text_size__hover_enabled="off" button_one_text_size__hover_enabled="off" button_two_text_size__hover_enabled="off" button_text_color__hover_enabled="off" button_one_text_color__hover_enabled="off" button_two_text_color__hover_enabled="off" button_border_width__hover_enabled="off" button_one_border_width__hover_enabled="off" button_two_border_width__hover_enabled="off" button_border_color__hover_enabled="off" button_one_border_color__hover_enabled="off" button_two_border_color__hover_enabled="off" button_border_radius__hover_enabled="off" button_one_border_radius__hover_enabled="off" button_two_border_radius__hover_enabled="off" button_letter_spacing__hover_enabled="on" button_letter_spacing__hover="0" button_one_letter_spacing__hover_enabled="off" button_two_letter_spacing__hover_enabled="off" button_bg_color__hover_enabled="off" button_one_bg_color__hover_enabled="off" button_two_bg_color__hover_enabled="off"][/et_pb_comments][/et_pb_column][/et_pb_row][/et_pb_section]