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Lecture_2_-_Overview_of_Financial_Statements - FNA 1002X...

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FNA 1002X 2007-1st (20/08/2007) by Vincent Chen 1 Lecture 2 Overview of the Financial Statements I. Overview of the Financial Statements Financial statements include 1) balance sheet (statement of financial position); 2) income statement; 3) statement of cash flows; and 4) statement of retained earnings. 1. Balance Sheet (Statement of Financial Position) – reports the financial positions (assets, liabilities and owners’ equity) of a company at a particular point of time Elements of the balance sheet include assets, liabilities and owners’ equity Assets: the economic resources owned or controlled by the company (cash, accounts receivable, inventory, buildings, patents…) o Current assets: cash and other assets that can be converted to cash within a year (cash, accounts receivable and inventory) o Noncurrent (long-term) assets: assets to be used or tuned into cash beyond a year (notes receivables, buildings, land, and patent) Liabilities: probable debts or obligations that will be paid for with assets or services (accounts payable, tax payable, unearned revenue…) o Current liabilities: obligations expected to be satisfied by cash or services rendered with a year (accounts payable, and accrued liabilities) o Long-term liabilities: debts or obligations expected to be paid beyond a year (long-term loan) Owners’ equity: the owners’ claims on the assets (net assets) of the company o Common stock: face value of issued common stocks o Paid-in capital: the difference between face value and market value of common stocks when issued o
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