Financial statements

Question 1

Discuss the statement of financial position

Answer 1

*Gives the user an indication of the financial state of an organisation at a specific date
*only items that meet the definition of an asset,liability and equity will be disclosed in statement of financial position
*Has two sections which is assets ,liabilities ,equity and the total of these sections must be equal for statement to balance

Question 2

Discuss statement of profit or loss and other comprehensive income

Answer 2

*Gives the user an indication of the financial peformance of an organisation over a peroid of time
*Only items that meet the dfefinition of income or expense will be recognised in the proft or loss of this statement
*will give users an indication of the total proft or loss an organisation has generated over a specific period

Question 3

Discuss statement of changes in equity

Answer 3

*Indicates movement or changes that took place in equity over a specific period
*Only items classified as equity
*Also include profit or loss from statement of ptofit or loss as this becomes part of the organisation

Question 4

Statement of cash flows

Answer 4

*discloses the cash flow that took place with relation to operating,financing and investing over the specific period
*Cash flows from operating activities -relates to the cash flows that are generated by means of day to day operations of the organisation
*cash flow from investing activities -relates to the cash flows that are generated by investments of the organisation
*cash from finacing activities -relates to the cash flows that arise as a result of obtaining and repaying finance in the organisation .
*direct approach is preferred although organisations use indirect approach

Question 5

Discuss notes to the financial statements

Answer 5

it requires that explanatory notes accompany financial statements to provide more details about information included in primary statements.