Chapter 2Introduction to Financial Statementsand Bookkeeping1
Learning objectivesAfter reading this chapter you should be able to:•Understand the purpose of the income statement and identify its parts•Understand the purpose of the balance sheet and identify its parts•Understand the purpose of the statement of changes in owners’ equity and identify its parts•Understand the purpose of the cash flow statement and identify its parts•Record business transactions•Produce financial statements based on recorded transactions•Make adjustments to financial statements2
Annual Report•It contain the primary data used in the FS, enablingusers to estimate a firm growth, risk and profitability.•It will also include a management reviews, and potentialsupplementary report.•The key elements of financial statements- consisting oftheincomestatement,balancesheet,cashflowstatement and statement of owner's equity.3ﯾﺣﺗويﻋﻠﻰاﻟﺑﯾﺎﻧﺎتاﻷوﻟﯾﺔاﻟﻣﺳﺗﺧدﻣﺔﻓﻲFS،ﻣﻣﺎﯾﻣﻛّناﻟﻣﺳﺗﺧدﻣﯾنﻣنﺗﻘدﯾرﻧﻣواﻟﺷرﻛﺔوﻣﺧﺎطرھﺎورﺑﺣﯾﺗﮭﺎ.ﻛﻣﺎﺳﯾﺗﺿﻣنﻣراﺟﻌﺎتإدارﯾﺔوﺗﻘرﯾرﺗﻛﻣﯾﻠﻲﻣﺣﺗﻣل.اﻟﻌﻧﺎﺻراﻟرﺋﯾﺳﯾﺔﻟﻠﺑﯾﺎﻧﺎتاﻟﻣﺎﻟﯾﺔ-ﺗﺗﻛونﻣنﺑﯾﺎناﻟدﺧلواﻟﻣﯾزاﻧﯾﺔاﻟﻌﻣوﻣﯾﺔوﺑﯾﺎناﻟﺗدﻓقاﻟﻧﻘديوﺑﯾﺎنﺣﻘوقاﻟﻣﻠﻛﯾﺔ.
Overview of financial statementsRevenues and expensesIncome statementGains and lossesStatement of comprehensiveincomeAssetsLiabilitiesBalance sheetEquityCash inflows and outflowsCash flow statement4
Income statement (IS)•Income statement disclose a firm's earnings for a predefined period, which annualreport is 12 month•IS includes a firms earning, calculated as (single step):•Revenues•− Expenses•= Net Income/profit•Revenues: are income form selling a firm's product or service,•Expenses: consist of a variety of item including depreciation and amortisation5ﺑﯾﺎناﻟدﺧلﯾﻛﺷفﻋنأرﺑﺎحاﻟﺷرﻛﺔﻟﻔﺗرةﻣﺣددةﻣﺳﺑﻘًﺎ،واﻟﺗﻲﯾﻛوناﻟﺗﻘرﯾراﻟﺳﻧويﻟﮭﺎ12ﺷﮭرًاﯾﺗﺿﻣنISأرﺑﺎحاﻟﺷرﻛﺎت،ﻣﺣﺳوﺑﺔﻋﻠﻰأﻧﮭﺎ)ﺧطوةواﺣدة(:اﻹﯾرادات-اﻟﻣﺻروﻓﺎت=ﺻﺎﻓﻲاﻟدﺧل/اﻟرﺑﺢاﻹﯾرادات:ھﻲﺷﻛلدﺧلﯾﺑﯾﻊﻣﻧﺗﺞأوﺧدﻣﺔاﻟﺷرﻛﺔ،اﻟﻣﺻﺎرﯾف:ﺗﺗﻛونﻣنﻣﺟﻣوﻋﺔﻣﺗﻧوﻋﺔﻣناﻟﺑﻧودﺑﻣﺎﻓﻲذﻟكاﻻﺳﺗﮭﻼكواﻹطﻔﺎء
Income statement (IS)•Is this a sufficient (informative) income statement?•What kind of information is missing?•What are the classification issues?•IFRS reflect this need to standardise how a companyrecognize,measureandclassifiedexpenseandrevenue.6
Income Statement•The Expense section presented as:- Function of Expense (based on activity):•Such as cost of good sold, distribution cost,selling expenses, administrative expense,other expense and loss, whichever provides information that is reliable and relevant.