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FINANACIAL STATEMENT

Financial Accounting
 Accounting Cycle
The sequence of accounting procedures
constitutes a complete accounting process,
which is repeated in the same order in each
accounting period.
 ACCOUNTING CYCLE
Recording Tr. in
General Journal

Recording of Posting into

opening Entries General Ledger

Post Closing Trial Preparation of

Balance Trial Balance

Financial Statement

1) Income Statement
2) Balance Sheet
Closing Entries Adjustment
3) Statement of Change
in Equities/Retained Preparation of
Earning Adjusted Trial Reversing
4) Statement of Cash Balance Entries
flows
 Financial Statement
 Financial statements communicate the financial
information of the business.

Components of Financial Statement

1. Income Statement
2. Balance Sheet
3. Statement of Change in Equities/ Retained
Earnings
4. Statement of Cash flow
5. Notes to the Accounts
 Financial Statement
Income Statement
Income Statement shows the profitability of a business of a
financial year.
It is a statement in which revenue and expenditures are
matched to arrive at a figure of profit or loss.
Balance Sheet
Balance sheet shows the financial position of a business at
a specific time. It is very similar to accounting equation and
it is also called “Statement of Position”.
 Financial Year /vs/ Calendar Year
Financial Jan 1st, 2016 Dec 31st, 2016
Year

Financial Apr 1st, 2016 Mar 31st,2017

Year

Financial July 1st, 2016 June 30th, 2017

Year

Financial Oct 1st, 2016 Sep 30th, 2017

Year
 Types of Business
• Service Business
• Trading Business
• Manufacturing Business
 Question
On Dec 31st, 2015, the selected ledger accounts of NY
Company show the following balances.

Salaries Expense Rs.24,000; Office Rent Rs.16,000;

Commission Income Rs.60,000; Consultation Fees
Rs.20,000; Advertising Expense Rs.10,000; and General
Expenses Rs.5,000.

Required: Prepare income statement for the year

ended Dec 31st, 2015.
 NY Company
Income Statement
For the Period Ended Dec 31st, 2015
Amount Amount
Total Revenue
Commission Income 60,000
Consultation Fees Income 20,000
Total Revenue 80,000
Less: Total Expenses
Salaries Expense 24,000
Advertising Expense 10,000
Office Rent Expense 16,000
General Expense 5,000
Total Expenses 55,000
Net Profit 25,000