The main contents of the chapter consist of the following: A statement of financial position (SFP), a statement of comprehensive income, a statement of changes in equity, a statement of cash flows, accounting policies and explanatory notes. | Revise Lecture 4 1 Revise Lecture 4 A complete set of financial statements comprises: A statement of financial position (SFP) A statement of comprehensive income A statement of changes in equity A statement of cash flows Accounting policies and explanatory notes 2 Introduction to published accounts The accounting cycle The sequence of accounting procedures completed during each accounting period is called the accounting cycle. 3 Introduction to published accounts A broad summary of the steps of the accounting cycle includes; Recording transactions Recording adjusting entries Preparing the financial statements 4 Introduction to published accounts Recording transactions A transaction is an event that causes a change in a company’s assets, liabilities or stockholders equity, thus changing the company’s financial position Transactions must be recorded in a journal, then ledger then trial balance. 5 5 Double entry system 6 Introduction to published accounts Recording adjusting entries The accrual basis accounting requires that revenue be recognized when realized and expenses recognized when incurred (matching concept). A company must use the accrual basis to achieve a reasonable result for the SFP and IS 7 Introduction to published accounts The accrual basis needs numerous adjustments to accounts balances at the end of the accounting period. For example, Rs1000 paid for insurance on 1st October for one year period could have been recorded as a debit to insurance expense Rs1000 and a credit to cash Rs1000 If this company prepares FS on December 31, it would be necessary to adjust insurance expense. 8 Introduction to published accounts Preparing the financial statements The financial controller and finance director uses the accounts after the adjustments have been made to prepare the financial statements. These statements represent the output of the accounting system. Two of the principal financial statements, IS and SFP can be prepared directly from the adjusted . | Revise Lecture 4 1 Revise Lecture 4 A complete set of financial statements comprises: A statement of financial position (SFP) A statement of comprehensive income A statement of changes in equity A statement of cash flows Accounting policies and explanatory notes 2 Introduction to published accounts The accounting cycle The sequence of accounting procedures completed during each accounting period is called the accounting cycle. 3 Introduction to published accounts A broad summary of the steps of the accounting cycle includes; Recording transactions Recording adjusting entries Preparing the financial statements 4 Introduction to published accounts Recording transactions A transaction is an event that causes a change in a company’s assets, liabilities or stockholders equity, thus changing the company’s financial position Transactions must be recorded in a journal, then ledger then trial balance. 5 5 Double entry system 6 Introduction to published accounts Recording adjusting entries The
