Sample one-year and two-year comparative balance sheet statements

In my previous post, I wrote about understanding the balance sheet. Balance sheet shows the financial condition of a particular business entity. Reading and understanding balance sheet is very important for short-term and long-term analysis. This statement is the ultimate financial statement since income statement’s net profit is forwarded and closed in the retained earnings (which is shown in the equity section of the balance sheet); cash flow statement is netted to cash and reported as current asset in the asset section of the balance sheet; and the equity in the statement of changes in equity is also forwarded as equity in the balance sheet. Read more

Understanding the Balance Sheet

A balance sheet is a formal statement showing the financial position of an entity as of a particular date. The balance sheet is the only financial statement that reports as of a particular date compare to income statement, statement of changes in equity, and cash flows which all reports for a particular period of time. The balance sheet presents the three elements of financial position, namely assets, liabilities and equity.

Assets are defined as resources controlled by the entity as a result of past transactions and events and from which future economic benefits are expected to flow to the company. In layman’s language these are the properties owned by the entity. Read more

Elements and components of a complete set of financial statements

Financial statements are often described as the language of business. These statements tell the condition and performance of a business historically, currently and prospectively. They are the tongues of businesses that communicate with their users and readers.

Financial statements are the formal end product or main output of a business’ financial accounting process. These are the means by which the information accumulated and processed in financial accounting is periodically communicated to the users.

General purpose financial statements are those intended to serve users who do not have the authority to demand financial reports tailored for their own needs. The objective of general purpose financial statements is to Read more

What is basic accounting?

According to American Institute of Certified Public Accountants (AICPA), accounting is “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.”

Basically, accounting is the process of identifying, measuring and communicating economic information so a user of the information may make informed economic judgments and decisions based on it.

From the definition above, there are three important activities in the accounting process, namely identifying, measuring and communicating. Read more