Business Communication Upper Intermediate U2W09 John Silberstein

Financial Statements What is accounting? Accountancy is the process of communicating financial information about a business entity to key stakeholders. Accounting is defined by the American Institute of Certified Public Accountants (AICPA) as "the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof."

Financial Statements Who are the key stakeholders? Shareholders and Investors Management Government

Financial Statements What adjectives would you use to stereotypically describe an Accountant?

Financial Statements What are the three most important financial statements? Balance Sheet Income Statement Cash Flow Statement

Financial Statements Balance Sheet What is the Balance Sheet? It is a snap shot of a company’s current health. It shows the company’s Assets, Liabilities and Equity. These are permanent accounts.

Financial Statements Balance Sheet What are Assets? Economic Resources Anything tangible or intangible that is capable of being controlled to produce or to have a positive economic value.

Financial Statements Balance Sheet What are Liabilities? Amounts a company owes other entities or is otherwise legally obligated to pay.

Financial Statements Balance Sheet What is Owners’/Shareholders’ Equity? The value of invested funds in a company.

Financial Statements Balance Sheet What Accruals? It is an accumulation of some value over a period of time. This may mean a service or product that is delivered over a period of time. The value needs to be accounted for, but an invoice may not have been received.

Financial Statements Balance Sheet What deferrals? Deferred expense: Expense is recognized after cash is paid out. Deferred revenue: Revenue is recognized after cash is received

Financial Statements Income Statement What is an Income Statement? An Income Statement is a statement of revenue (turn over) and expenses over a period of time. This period can be any period of time that a company wants analyzed (Weekly, Monthly, Quarterly, Bi-Annually or Yearly). For Tax purposes (In the US), companies are expected to file quarterly tax estimates based on quarterly income statements.

Financial Statements Income Statement Net Income = Revenues – Expenses If Revenues are greater than expenses, the company has made a profit. If Expenses are greater, than the company has made a loss. These accounts are temporary and at the end of an specified accounting period, which would be at least yearly.

Financial Statements Statement of Cash Flows What is the Statement of Cash Flows (or Cash Flow Statement)? It shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. Essentially, the cash flow statement is concerned with the flow of cash in and cash out of the business.

Financial Statements Statement of Cash Flows Who are the key stakeholders of the Cash flow statement? Accounting personnel, who need to know whether the organization will be able to cover payroll and other immediate expenses, Potential lenders or creditors, who want a clear picture of a company's ability to repay, Potential investors, who need to judge whether the company is financially sound, Potential employees or contractors, who need to know whether the company will be able to afford compensation, Shareholders of the business.

Financial Statements Balance Sheets

Financial Statements Balance Sheets

Financial Statements Income Statements

Financial Statements Income Statements

Financial Statements Cash Flow Statements Microsoft Statements