PART1- FOUNDATION

1.BACKGROUND

Financial Statements
Balance Sheet Profit & loss Acc Cash Flow Statement

Balance Sheet
Basic Document of Account Consists of two columns Liabilities and Assets

Assets
List of items of value owned by business Mainly shown in Acc at their cost

Liabilities
Amounts due to parties external to the company

Traditional layout
Assets Things owned by the Business Liabilities/Funds Amount owed by the Business

Sources and Uses of Funds Approach

Assets Uses Where money Spent Liabilities/Funds Sources Where money obtained

Balance Sheet structure

LIABILITIES ASSETS

Owners Fund

FIXED ASSETS

Long Term loans

CURRENT ASSETS Current Liabilities

Current Assets
Short Term (Normally Convert Back into Cash quickly) Gathered together under four heading:
1. 2. 3. 4. Inventories Accounts Receivables Cash Misc. Current Assets

Fixed Assets
Long investments Gathered together under three heading:
1. Intangibles-Goodwill, Patents, Licenses etc 2. Net Fixed Assets- Land & Bldg, Plant & Equipment, Transport, Computers etc 3. Long term Investment-Shares in associated companies,

Current Liabilities
All short term liabilities( to repaid within one year) Gathered together under Three heading:
1. Accounts payable(Creditors) 2. Short term loans(Bank overdrafts & all other interest bearing short term debts) 3. Misc.(All other short term liabilities- Accrued payment, interest, current tax & dividend due)

Long term Loans

More than one year Mortgages, Debentures, Term Loans, Bonds Medium:3-5 yrs. Long: More than 5 upto 20 yrs

Owners Fund
Claims By the owners on the Business Three major Sub-division:
1. Issued common stock-Three diff value associated Nominal Value Book Value Market Value 2. Capital Reserve-all surpluses accruing to the common shareholder not arisen from trading. Revaluation of fixed assets Premium on shares Currency gains on Balance sheet items, some nontrading profits etc cont..

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3. Revenue reserve: Amount retained in the company from normal trading profit Diff terms Attached
Revenue reserve General reserve Retained Earning