Financial statements Flashcards
Discuss the statement of financial position
*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
Discuss statement of profit or loss and other comprehensive income
*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
Discuss statement of changes in equity
*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
Statement of cash flows
*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
Discuss notes to the financial statements
it requires that explanatory notes accompany financial statements to provide more details about information included in primary statements.