The purpose of financial statements is to report a variety of

seemingly complex information such that the end-users will

be able to make sense of the given information. From a
practical standpoint , financial statements will give its user a
way to read , understand, interpret, and analyze economic
transactions translated into financial records.
 TYPES OF FINANCIAL STATEMENTS
1. Balance Sheet- this contains information as of the date of its
preparation about the firm’s assets, liabilities and shareholder’s
equity.
2. Income Statement- this includes the revenue the firm has earned
over a specific period of time, usually a quarter of a year or a full
year, the expenses it has incurred during the same period and the
profit the firm has earned.
3. Cash Flow Statement- this is a report of the cash received and
cash spent by the firm over a specified period of time.
CURRENT ASSETS
- A current asset is an asset that can easily be sold or converted into cash.
1. Cash and Cash Equivalent- cash equivalents are current assets that are easily
convertible into cash. Examples are saving accounts, checking accounts, bonds
that are maturing within one year or less, treasury bills and marketable
securities.
2. Short-term Investments- although it is good to have a cash in order to have
enough to support operations, too much idle cash could mean inefficient use of
company assets.
3.Marketable Securities- these are very liquid short-
term investments and they are a good substitute to
cash.
4.Accounts Receivables- these represent products and
services sold by the firm to customers on credit.
Preauthorized debit- is a payment system that
works well a firm collects repetitive or routine
payments from customers.

5. Inventory- this includes raw materials, work in

process, and products that are ready to be sold.
FIXED ASSETS
- A fixed asset is a type of asset that the firm does not expect to sell or
otherwise
1. Tangible Assets- these are assets which can be physically seen or
touched by those who use them.
Depreciation- is reduction in the value of a fixed assets.
2. Intangible Assets- as the term implies, intangible assets are not
physical assets.
CURRENT LIABILITIES
- A current liability is a financial obligation of a firm that is due
within one year or less.
LONG- TERM LIABILITIES
- A long-term liability is a financial obligation of a firm
that is due more than one year into the future.
OWNER’S EQUITY
-owner’s equity may be defined simply as the difference between the
value of all assets and the value of all liabilities.
INCOME STATEMENT
- Is the financial statement that summarizes a firm’s sales or revenues,
expenses incurred, and profits.
 CASH FLOW STATEMENT
- According to BUSINESS FIANCIAL PLANNING , “ is the financial
statement prepared by a company which includes all details on
the sources and uses of funds.”
- A cash flow statement is prepared at least once a quarter.
- A cash flow from operating activities refer to money generated
from the regular activities of the frim such as production , selling
of goods, or provision of services customers.
- A cash flow from investing activities refers to the change in a firm’s
cash position resulting from investments made, including money spent
on plant and equipment.
- A cash flow from financing activities refers to changes in the
company’s cash position due to the activities of the firm such as
raising capital or repayment of debt –adding loans , debt restructuring ,
deferment of payments , and insurance of new stocks in the financial
market.