1. INCOME STATEMENT & BALANCE SHEET

3. Users of Financial Information Internal Users of Financial Information Internal Persons who plan, organize and run a businessPersons who plan, organize and run a business –Directors –Managers –and other executives

4. Users of Financial Information Internal Users Ask? Cash to pay bills? Cost per unit? Give raises? Which product is profitable?

5. Users of Financial Information External InvestorsInvestors OthersOthers –Regulatory agencies –Tax authorities –Customers (External Stakeholders) (External Stakeholders) CreditorsCreditors

6. Users of Financial Information External Users Ask? Earning enough? Compare to competition? Will the company be able to pay bills when due?

7. Content and Purpose of Financial Statements Accountants communicate with users through three financial statements Income Statement Balance Sheet Statement of Cash Flows

8. Income Statement ( Statement of Profit and Loss) Income Statement presents firm’s financial performance in terms of revenues, expenses, and profits over a given time period. It focus on revenues and costs associated with revenues.

9. Income Statement Summarizes revenues and expenses for period: month, quarter, or year.Summarizes revenues and expenses for period: month, quarter, or year. If revenue > expense = Net Income.If revenue > expense = Net Income.

10. Revenue xxx Sales xxx Other income Total Revenue XXXX Less: Expenses Raw material Employee benefit expenses Depreciation Finance cost Other expenses Total Expenses XX XXX Profit before Tax (PBT) Less: Tax XXX XX Profit after tax (PAT)XXX Statement of Profit and Loss

11. Balance Sheet Reports assets and claims to assets. Claims of creditors, liabilities. Claims of owners, stockholders’ equity. Assets = Liabilities + Stockholders’ Equity Specific date – one point in time!

12. Components of Balance sheet Assets – Its anything tangible or intangible which is owned or leased by a business. Liability – Its any obligation which a company owes to another business entity Owner’s equity - all claims of the proprietor, partners, or stockholders against the assets of a firm, equal to the excess of assets over liabilities.. Basic accounting equation - relationship that states that assets equal liabilities plus owners’ equity.

13. Equity and Liabilities Share Capital Reserve and Surplus xx xxx Non- Current Liabilities Long term borrowingsxx Current Liabilitiesxxx Total liabilities Assets Non- Current Assets Fixed Assets (tangible and intangible) Non-current investments xx xxx Current Assets Inventories Receivables Cash and bank balances xx Total assetsxxxx Balance Sheet as at