Accounting for managment - The major financial statements:...

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Unformatted text preview: The major financial statements: These are documents that provide a picture of the financial position and performance of a business. This is usually made up of three major groups: 1- Cash flow statements: this records cash movements 2- Income statement or profit and loss account: How much wealth (ie profit) was generated or lost over that period 3- The balance sheet or statement of financial position: the accumulated wealth of the business at the end of a period and the form that this wealth takes Example of a cash flow statement: Cash introduced to a business: 40 Cas from sales of wrapping paper: 45 Cash paid to buy wrapping paper: 40 Closing balance of cash: 45-------------------------------------------------------------------------------------------------------- Income statement (profit and loss account): Sales revenue: 45 Cost of goods sold ( 3 quarters of 40 ): 30 Profit: 15 Note that it is only the cost of goods sold that is matched against the sales revenue. Any unsold items (one quarter of the wraping paper) will be charged against the future sales revenue that it generates.-------------------------------------------------------------------------------------------------------- Balance sheet Cash (closing balance): 45 Inventories of goods for resale (one quarter of 40): 10 Total assets: 55 Equity: 55 Assets are business resources (things of value to the business) and include cash and inventories. Equities is the investment or stake of the owner(s) 1- The Balance sheet: This has the objective of setting out the financial position of a business at a certain time. This will reveal the form in which the wealth of the business is held and how much wealth is held in each form. It sets out the assets of the business on one hand and the claims against the business on the other. Assets: A resource held by the business that has the following characteristics: 1- A probable future benefit must exist. 2- The business must have an exclusive right to control the benefit 3- The benefit must arise from some past transaction or event....
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This note was uploaded on 03/28/2011 for the course MANAGEMENT MN 1015 taught by Professor John during the Spring '11 term at Royal Holloway.

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Accounting for managment - The major financial statements:...

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