1. 2.1 FINANCIAL POSITION

2. ACCOUNTING
The process of gathering and preparing financial information that provides accurate and useful records and enables decisions to be made.

3. 1. 4 BASIC FINANCIAL INFORMATION REPORTS

4. 4 BASIC FINANCIAL REPORTS
Income statement
Balance sheet
Statement of cash flows
Statement of retained earnings

5. Considered the most important financial statement
INCOME STATEMENT
Presents the revenues, expenses, and profits/losses generated during the reporting period
Considered the most important financial statement

6. Revenue: the income generated by sale of goods/services (money earned)
INCOME STATEMENT
Revenue: the income generated by sale of goods/services (money earned)
Expenses: the cost in an attempt to generate revenue (money spent)
Profit/loss:
Profit: Revenue > Expense
Loss: Revenue < Expense

7. INCOME STATEMENT FOR APPLE

8. STATEMENT OF CASH FLOWS
Presents inflow and outflow of cash during the reporting period

9. STATEMENT OF RETAINED EARNINGS
Presents changes in equity during the reporting period

10. Presents the assets, liabilities, and equity as of the reporting date.
BALANCE SHEET
Presents the assets, liabilities, and equity as of the reporting date.

11. 2.
BALANCE SHEET
Before we get to the actually structure of balance sheet, we shall see the components that make up the balance sheet.

12. 3 STEPS TO DETERMINE FINANCAIL POSITION
Step 1: List and total all assets.
Step 2: List and total all liabilities.
Step 3: Calculate the owner’s equity.

13. ASSET
Things that you own.

14. CHRIS TURNER’S FINANCIAL POSITION
Cash $55
Skip equipment $300
Bank balance $215.50
Bicycle $185
Stereo $250
Total Assets $
Cash $55
Owed to Dad $200
Owed to Philip $80
Skip equipment $300
Bank balance $215.50
Library fines $12.50
Bicycle $185
Stereo $250

15. LIABILITIES
Things that you owe.

16. CHRIS TURNER’S FINANCIAL POSITION
Cash $55
Skip equipment $300
Bank balance $215.50
Bicycle $185
Stereo $250
Total Assets $
Owed to Dad $200
Owed to Philip $80
Library fines $12.50
Total Liabilities $292.50

17. The difference between assets and liabilities
OWNER’S EQUITY
The difference between assets and liabilities
Also called capital, equity, and net worth

18. FUNDAMENTAL ACCOUNTING EQUATION
A – L = OE
A = L + OE

19. CHRIS TURNER’S FINANCIAL POSITION
Cash $55
Skip equipment $300
Bank balance $215.50
Bicycle $185
Stereo $250
Total Assets $
Owed to Dad $200
Owed to Philip $80
Library fines $12.50
Total Liabilities $292.50

20. FUNDAMENTAL ACCOUNTING EQUATION AND CHRIS TURNER- L = OE
292.50
713.00

21. 3. REVIEW QUESTIONS & EXERCISES

22. KEY TERMS FOR TOMORROW Liquidity Accounts receivable Debtor
Accounts payable
Creditor