Archive about 'Financial Statements'

What Is An Income Statement?

WHAT IS AN INCOME STATEMENT?

The Income Statement reports ONLY the PROFITABILITY of a business

Unlike a Balance Sheet, which is a snapshot of a point of time, Income Statement reflects the profitability of a business FOR A SPECIFIC PERIOD OF TIME (monthly, quarterly or yearly).

In the Income [...]

How Do We Classify The Share Capital In A Company?

When we attempt to classify share capital, we might get confuse with the various terms used.
Append below a table to differentiate the various terms used in the classification of capital: authorized or nominal capital, issued capital, subscribed, called-up and uncalled-up capital and finally the paid-up capital:

WHAT IS AUTHORISED SHARE CAPITAL?

Authorised share capital is [...]

Limitations Of The Financial Statements

WHAT DO YOU THINK ARE THE LIMITATIONS OF FINANCIAL STATEMENTS?

Some of the limitations of the financial statements are as follows:

 As the historical costs and money measurement concepts govern the preparation of the balance sheet and income statements, hence these financial statements are essentially statements reflecting historical facts. It ignore inflationary trend and does not reflect [...]

Balance Sheet And Its Capital Side (Part 2 of 2)

FIRSTLY, LET US ASK OURSELVES WHAT ARE RESERVES?

 
Reserves are appropriations of profit namely when profits have been ascertained after deducting all expenses which includes provision and others. Reserves are residual earnings after all expenses and taxation which belongs to the owners namely the shareholders.
 
There are essentially two(2) types of Reserves:
 

Capital Reserves

 

Revenue Reserves

 
 

WHAT ARE CAPITAL RESERVES?

 
Capital [...]

Balance Sheet And Its Capital Side (Part 1 of 2)

WHAT IS A BALANCE SHEET?

 
A Balance Sheet is a snapshot of the financial position of an entity.
This snapshot is at a point of time.
Say, as at 7 May 2006, you look at Company A’s balance sheet, it reflects the financial position as at that day. After that day, the financial position company A can [...]

Balance Sheet And Its Liabilities Side( Part 3 of 3)

WHAT ARE LONG TERM LIABILITES?

 
Long Term Liabilities:

Is opposite of current liabilities which are more than 12 months from the date of the balance sheet.

Examples are:

Long term debts /fixed term loan

 
Remember that we need to classify the total debts into two(2) parts:

Current portion of long-term debts( amount owing within 12 months of balance sheet date and

 

Non-current [...]

Balance Sheet And Its Liabilities Side( Part 2 of 3)

WHAT ARE CURRENT LIABILITIES?

Current liabilities are  obligations/liabilities:

that is expected to be settled in the normal course of the enterprise’s operating cycle ; or

Is due to be settled within twelve months of the balance sheet date

Current Liabilities

Description

Accounts payable

Claims [...]

Balance Sheet And Its Liabilities Side( Part 1 of 3)

WHAT IS A BALANCE SHEET?

 
A Balance Sheet is a snapshot of the financial position of an entity.
This snapshot is at a point of time.
Say, as at 7 May 2006, you look at Company A’s balance sheet, it reflects the financial position as at that day. After that day, the financial position company A  can [...]

Balance Sheet And Its Asset Side( Part 3 of 3)

WHAT ARE FIXED ASSETS?

 
 
Fixed Assets are unlike current assets:
 

Which are NOT expected to be realised  or held for trading or sale

 

The costs of the fixed assets are allocated over the period of the useful lives to generate the income associate with it. This follows closely to the matching concept.

 

Examples of Fixed Assets are:

 

Property

 

Plant & machinery

 

Motor [...]

Balance Sheet And Its Asset Side( Part 2 of 3)

WHAT ARE CURRENT ASSETS?

Current assets are assets:

that are expected to be realised in, or is held for sale or consumption in, the normal course of the enterprise’s operating cycle ; or

is [...]