Relationships between the Statements

Question 1

Because the results on some statements are used as data for other statements, the statements are said to be interrelated (related to each other). State those relationships.

Answer 1

1) The statement of changes in equity depends, in part, on the results of the income statement. When there’s a profit, this amount is added to the beginning amount of retained earnings as part of the process of determining ending retained earnings- one of the components of total shareholder’s equity.
2) The statement of financial position and statement of changes in equity are interrelated because the ending balances of each component of shareholder’s equity - common shares and retained earnings as well as total shareholder’s equity at the end of the month reported on the statement of changes in equity is reported in the shareholder’s equity section of the statement of financial position.
3) The statement of cash flows and the statement of financial position are also interrelated. The statement of cash flows shows how the cash account changed during the period by stating the amount of cash at the begining of the period, the sources and uses of cash during the period, and the amount of cash at the end of the period. The ending amount of cash shown on the statement of cash flows agrees with the amount of cash shown in the assets section of the statement of financial position.

Question 2

Answer 2

Question 3

Answer 3

Question 4

To prepare financial statements, you must understand what? Which order are financial statements prepared in?

Answer 4

To prepare financial statements, you must understand the sequence in which these amounts are determined and how each statement affects the next.

Because each financial statement depends on information contained in another statement, financial statements must be prepared in a certain order: 1) income statement; 2) statement of changes in equity 3) statement of financial position and 4) statement of cash flows

Question 5

COMPARING IFRS AND ASPE

Answer 5

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Question 6

NOTE: summary of financial statements

Answer 6

Income statement shows past performance and this can give an indication of future performance. The statement of financial position reveals the company’s financial position and the relationship between assets, liabilities, and shareholder’s equity. The statement of cash flows reveals where the company is getting and spending its cash. Finally, the statement of changes in equity shows any changes in share capital as well as the impact that changes in current profits and dividends have on the company’s retained earnings.