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FINANCIAL STATEMENTS - Coggle Diagram
FINANCIAL STATEMENTS
Most companies incude three financial statements in their annual reports.
The profit and los account shows revenue and expenditure
It gives figures for total sales or turnover (the amount of business done by the company during the year) and for costs and overheads.
Part of the profit is paid in taxation, part is distributed to shareholders, and part is retained by the company to finance further growth.
.The first figure should be greater than the second: there should generally be a profit, an excess of income over expenditure.
The balance sheet shows the financial situation of the company on a particular date.
It lists the company's assets, its liabilities, and sharcholders' funds.
Assets
consist of its cash investments and property (buildings, machines, and so on) and debtors amounts of money owed by customers for goods or services purchased on credit
Liabilities
Consist of all the money that a company will have to pay to someone else.
A third financial statement has several names:
The source and application of funds statement
The Sources and uses of funds statement
The funds flow statement
The cash flow statement
The movements of funds statement
The statement of changes in financial position
This statement shows the flow of cash in and out of the business between balance sheet dates
Sources of funds include trading profits, depreciation provisions, borrowing, the sale of assets, and the issuing of shares.
Applications of funds include the purchase of fixed or finincial assets, the payment of dividends and the repayment of loans, and, in a bad year, trading losses.
The basic accounting equation, in accordance with the principle of double-entry bookkeeping
Assets
=
Liabilities
+
Owners' (or Shareholders') Equity
Or
Assets-Liabilities= Equity
An alternative term for
Shareholders' Equity
is
Net Assets
This includes:
Share capital
(money received from the issue of shares)
Share premium
(money realized by selling shares their nominal value)
Company's reserves
, including the year's retained profits.