OPENING PRAYER

- Read the bible verse

- Meditate in silence for a minute
- Whisper a personal prayer
ELEMENTS OF FINANCIAL
STATEMENTS
TYPES OF INFORMATION

Financial
Quantitative
Non-
Information financial

Qualitative Non-
financial
 Review: Definition of Accounting

Accounting is a service activity. Its function is

to provide quantitative information primarily
financial in nature, about economic entities
that is intended to be useful in making
economic decisions.
4
 FINANCIAL INFORMATION = FINANCIAL STATEMENTS

• INCOME STATEMENT/ STATEMENT OF COMPREHENSIVE INCOME

• STATEMENT OF FINANCIAL POSITION / BALANCE SHEET
• STATEMENT OF CHANGES IN EQUITY
• CASH FLOW STATEMENT
• NOTES TO FINANCIAL STATEMENTS
INCOME STATEMENT/
STATEMENT OF FINANCIAL PERFORMANCE/
PROFIT OR LOSS STATEMENT

• Shows the financial

performance of the company
for a given period of time.
• It shows if the result of
operations is profit, loss or
break-even
ELEMENTS OF INCOME STATEMENTS

Income/
Revenue

Elements

Expense
 ELEMENTS OF INCOME STATEMENTS

• Revenues (Income) are increases in owner’s equity as a result of

selling services or products to customers.

• Some examples of revenue accounts follow:

• Fees earned
• Commission revenue
• Rent revenue
• Sales
 ELEMENTS OF INCOME STATEMENTS

• The using up of assets or consuming services in the

process of generating revenues results in expenses.
•
• Some examples of expenses follow:
• Wages expense
• Rent expense
• Miscellaneous expense
Revenue / Income 90
Less: Expenses (70)
Profit/ Net revenue/ Net Income 20

Revenue / Income 90
Less: Expenses (95)
Loss/ Net loss ( 5)

Revenue / Income 90
Less: Expenses (90)
Breakeven -
STATEMENT OF FINANCIAL POSITION
/ BALANCE SHEET

• Reflects the financial condition

of the entity as of the end of
the period.
• It depicts whether the company
is in good financial health.
 ELEMENTS OF THE STATEMENT OF FINANCIAL POSITION

• Assets are resources owned by the business.

• Definition: Resources controlled by an entity as a
result of past events and from which future economic
benefits are expected to flow to the entity.

• Some examples of assets follow:

• Cash
• Supplies
• Accounts receivable
• Buildings
ELEMENTS OF STATEMENT OF FINANCIAL POSITION

• Liabilities are debts owed to outsiders (creditors).

• Definition: A present obligation of the entity arising
from past events, the settlement of which is expected
to result in an outflow from the entity of resources
embodying economic benefits.
• Some examples of liabilities follow:
• Accounts payable
• Notes payable
• Wages payable
• Interest payable
 ELEMENTS OF STATEMENT OF FINANCIAL POSITION

• Owner’s equity is the owner’s right to the assets of the

business after all liabilities have been paid.
• For a proprietorship, the owner’s equity is represented
by the balance of the owner’s capital account.
• Gabayan, Capital

• A drawing account represents the amount of

withdrawals made by the owner. (Withdrawal, Personal)
TYPES OF TRANSACTIONS AFFECTING OWNER’S EQUITY

Beginning Capital 100

Add: Investment 80
Add: Profit 10
Total 190
Less: Net loss -
Less: Drawing / Withdrawal (70)
Ending Capital 120
TYPES OF TRANSACTIONS AFFECTING OWNER’S EQUITY

Beginning Capital 100

Add: Investment 80
Add: Profit X
Total 190
Less: Net loss -
Less: Drawing / Withdrawal (70)
Ending Capital 120
Please answer problems 1ABC and 2AB