Forms Of Income Statement

PAS 1, paragraph 99, provides that an entity shall present an analysis of expenses recognized in profit or
loss using a classification based on either the function of expenses or their nature within the entity,
whichever provides information that is reliable and more relevant.

Functional presentation

This form classifies expenses according to their function as part of

cost of goods sold

distribution costs

administrative expenses

other expenses.

Finance cost.

Natural presentation

Under this form, expenses are aggregated according to their nature and not allocated among the various
functions within the entity.

It also referred to as the nature of expense method.

Which form of income statement?

PAS 1 does not prescribe any format.

Paragraph 105 simply states that because each method of presentation has merit for different types of
entities, management is required to select the presentation that is reliable and more relevant.

Statement of retained earnings

The statement of retained earnings is a key financial document that shows how much earnings a
company has accumulated and kept in the company since inception.

The important data affecting the retained earnings that should be clearly disclosed in the statement of
retained earnings.

a. Profit or loss for the period

b. Prior period errors.

c. Dividends declared and paid to shareholders

d. Effect of change in accounting policy

e. Appropriation of retained earnings

Statement of changes in equity

The statement of changes in equity is a basic statement that shows the movements in the elements or
components of the shareholders' equity.

An entity shall present a statement of changes in equity showing the following:

1. Comprehensive income for the period.

2. For each component of equity, the effects of changes in accounting policies and corrections of errors.

3: For each component of equity, a reconciliation between the carrying amount at the beginning and
end of the period, separately disclosing changes from:

a. Profit or loss

b. Each item of other income

c. with owners in their capacity showing separately by and distributions to as owners owners.