2 - Financial Statements

- statement showing the results of the business operations for a certain period

- shows the income received by the business and the costs and expenses incurred in realizing the income

- statement that gives information on the financial condition of a business as of a given date

- shows the assets, liabilities, and the investments or equity of the owner of the business

- new name for balance sheet

- things owned by the business

- debts owed by the business

- statement that gives information on the changes or movements in Owner’s Equity during the period

- statement that provides information on the sources and uses utilization of cash during the period

- statements that provides narrative disclosures and other information required by the standards but were not presented in the other financial statements

- form of income statement where all expenses are deducted from the total income

- applicable to service businesses

• Total Income 1,000,000

  Total Expense 400,000

  Net Income 250,000

- form of income statement that shows the different sections of the statements like total sales, cost of sales, and operating expenses

- applicable to merchandising business

• Sales 100,000,000

  Cost of Sales 400,000

  Gross Profit 600,000

  Expenses 350,000

  Net Income 250,000

- earnings derived from services rendered

- service fees, professional fees

- income derived from the sales of goods

- income account to designate earnings received from selling anything on a commission basis

- income account to designate earnings received from sources other than the main source of income

- payments made by the business to the government for its business operations

- cost of services rendered by the employees or workers of the business

- cost of office items like bond paper, carbon paper, ball pens, and the likes

- cost of transportation in delivering goods or services to customers

- the portion of accounts receivable which may not be collected

- the portion of the fixed asset which have been charged to income during the period

• Cost

  Useful life

• 20,000,000

  20 years

  = 1,000,000 depreciation expense annually

- insurance premium paid by the business

- payment of the space occupied by the business

- amount charged for use of money

- includes promotional expenses in the selling of the products

- payment for cost of light and water consumed by the business

- expense for repairing or servicing the building, machinery, or equipment of the business

- cash and other cash items which are not deposited in the bankC

- money deposited in the bank

- refer to company securities, usually stocks that are sold for cash

- claims of the business from anyone for sales made or services rendered on account

- claims of the business from anyone evidenced by a note

- is interest earned on an interest-bearing note not yet collected

- form of Balance Sheet when the assets are placed at the left side and the liabilities and the owner’s equity at the right side of the statement

- form of Balance Sheet where the arrangement will be from top to bottom

- the assets are listed first, followed by the liabilities and the owner’s equity

- land space owned by the business

- the building/edifice constructed, owned, and intended for use by the business

- pieces of furniture used in the business

- tables, chairs, cabinets, etc.

- transportation vehicles owned by the business

- cars, jeeps, trucks, vans, etc.

- assets that do not have physical existence owned by the business

- goodwill, patents

- small items of equipment like pliers, hammers, screwdrivers, etc.

- debts of the business paid during the accounting period through current assets or the creation of another asset

- liabilities payable beyond one year

- current liability which refers to debts or obligations that arise from the purchase of goods/services on account

- current liability if the note is payable within a year

- interest due to an interest bearing note

- synonymous term with interest payable

- taxes due for the government not yet paid by the business

- salaries not yet paid by the business to its employees/workers

- refers to the vested interest of the owner in the business

• Assets - Liabilities

- shows the withdrawal of cash or other items from the business by the owner

- deducted from the income earned by the business

- temporary account opened at the end of teh accounting period to absorb income and expense accounts before finally closing it to capital

- relieves the capital account of hte many debits and credits

- user of financial information who are directly involved in managing the business

- business owners, board of directors, managerial personnel

- user of financial information who are not directly involved in managing the business

- investors, customers, employees, creditors, government, public

- to determine the activities of the enterprise for planning, organizing, leading, and controlling

- external user who assess the ability of the investee to pay dividends and pay returns to investors

- external user who determines the ability of the enterprise to be a continuing source of supply and the ability of the company to exist over a long period of time

- external user who determines the stability and profitability of the employers and the ability of the employer to pay salaries and fringe benefits

- external user who know whether to approve the loan or grant credit and the ability of the borrowers to be on time in paying the loans granted

- external user who determines the capacity of the business to pay taxes and its tax compliance, and serves as a base for monitoring and regulating the activities of the enterprise

- external user who determines the activities of the enterprise and its contribution to the economy in the form of number of employees, ownership of assets, prices of their products, patronage of local supplies, and patronage by customers