financial statements copy
TRANSCRIPT
Cash flow statements
Records all incomings, e.g. sales, and outgoings, paying for stock,Wages.
Shows monthly balance
E.g. for SME
E.g. For Large business and Public Companies
Examine why a retailer may have a variable cash inflow, depending on the time of year. (4)
Explain how a cash flow statement may be used to give a detailed insight into the financial situation facing a business. (3)
Questions:
Income StatementAka Statement of financial performance aka Profit and
Loss Statement
Definition:
A summary of the income earned and the expenses incurred over a Period of trading
Simple income statement: (includes the 5 main categories)
Revenue from Sales:
Money earned from sale of goods or services. Must consider discounts +Returns. E.g.
Gross Profit:
The term given to the sales less the cost of goods sold (COGS)
Gross Profit = Sales – COGS
COGS:
COGS = Opening stock + purchases – Closing stock
Opening stock is the value of the stock that the business has atThe start of the yearClosing Stock is the value of stock on hand at end of year.e.g.
Expenses:Expenses are simply the costs of manufacturing and managing the saleof a product or service
Expenses are broken down into 3 categories:
Selling Expenses
Administrative Expenses
Financial Expenses
E.g. Wages and advertising
E.g. Stationary and rent
E.g. Interest and insurance
Final Stage:
Net Profit
Net profit = Gross Profit - Expenses
Task: Complete revision questions 1-6 p.240-241
Balance SheetsOverview
Definition:
A balance sheet is a statement of the business’s assets andLiabilities (financial position) at a particular time.
Assets: (Items of value to the business that can be given a monetary value
Current assets:
Items whose value is expected to be used up, or turned over within 12 monthse.g. Bank savings, inventory (stock)
Non-current assets:
Items that have an expected life of three to five years or longere.g. Buildings, machinery
Intangibles:
Things of worth that have no physical substance e.g. Trademarks, patents
Liabilities: (items of debt owed to other organisations)
Current liabilities:
Are those in which the debt is expected to be repaid in a short term (12 months or less)e.g. Overdrafts, credit cards
Non-current liabilities:
Are long-term debt items such as mortgages and leases
Owner’s Equity: (is the funds contributed by the owners to establish and build the business. It is also called ‘capital’)
Considered to be a liability because it is a type of debt the business carries. However, unlike liabilities, owner’s equity is a debt owed to owners becauseOf the risk they took in investing in the business.
The balance sheet equation:
Task: Complete Revision Questions 1-5 p.245-246