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Lecture Accounting for business: A guide for non-accountants (2/e) – Chapter 3: Financial accounting reports

The learning objectives for this chapter include: Describe the purpose and format of a statement of financial performance, explain the difference between gross profit and net profit, differentiate between cash and accrual accounting systems,. | Chapter 3 Financial accounting reports 3- Objectives Describe the purpose and format of a Statement of Financial Performance. Explain the difference between gross profit and net profit. Differentiate between cash and accrual accounting systems. Explain the matching principle and the need for balance day adjustments. 3- Objectives (continued) Define depreciation, closing inventory, prepayments, accruals and doubtful debts. Describe the purpose and format of a Statement of Financial Position. Prepare a classified Statement of Financial Performance and a classified Statement of Financial Position from the Trial Balance of a sole trader, with no balance day adjustments. 3- Objectives (continued): Explain the use of an Appropriation Statement for a partnership and a company. Describe the purpose and format of a Statement of Cash Flows. Explain the differences between company financial reports prepared for internal purposes, and those prepared to meet statutory requirements. 3- Statement of Financial Performance aims to match the revenue of the business with the expenses associated with earning that revenue for the relevant period of time is produced for a particular Period of time is generally produced for a year at 30 June (end of the Financial year) can be produced at more frequent intervals determines the profit or loss of the business. 3- NCA assets have a capacity to last longer than 1 year Statement of Financial Performance (continued) Two types of businesses Service firms less complicated statements Trading/manufacturing firms more complicated statements. 3- Statement of Financial Performance (continued) Service Firms 3- As discussed on the previous slide. Service firms Statements of Financial performance are less complicated and it is just a matter of revenue less expenses. Statement of Financial Performance (continued) Trading firms COGS Beg Inv + Purchases + buying exp – (Closing Inv + Purch returns) Gross profit Net sales less . | Chapter 3 Financial accounting reports 3- Objectives Describe the purpose and format of a Statement of Financial Performance. Explain the difference between gross profit and net profit. Differentiate between cash and accrual accounting systems. Explain the matching principle and the need for balance day adjustments. 3- Objectives (continued) Define depreciation, closing inventory, prepayments, accruals and doubtful debts. Describe the purpose and format of a Statement of Financial Position. Prepare a classified Statement of Financial Performance and a classified Statement of Financial Position from the Trial Balance of a sole trader, with no balance day adjustments. 3- Objectives (continued): Explain the use of an Appropriation Statement for a partnership and a company. Describe the purpose and format of a Statement of Cash Flows. Explain the differences between company financial reports prepared for internal purposes, and those prepared to meet statutory requirements. .