Welcome to my Presentation Session
Welcome to our Presentation SessionTopic: Interpretation of
financial statements
Group members name: Md. Abdul Kaium 120106031 Md. Abdullah Reza
120106045 Financial Statements :
Financial statements are formal records of the financial
activities of a business, person, or other entity. Financial
statements provide an overview of a business or person's financial
condition in both short and long term. PURPOSES OF FINANCIAL
STATEMENTSa) The basic purpose of financial statement is
communicate to their interested users, quantitative and objective
information are useful in making economic decisions.b) Financial
statements are intended to meet the specialized needs of conscious
creditors and investors.c) Financial statements are prepared to
provide reliable information about the earning of a business
enterprise and it ability to operate of profit in future. d)
Financial statements are intended to provide the base for tax
assessments.
e) Financial statement are prepare in a way provide information
that is useful in predicting the future earning power of the
enterprise.
f) Financial statements are prepares to provide reliable
information about the changes in economic resources.
Limitations of Financial Statements(1) Financial Statements are
normally prepared on the basis of accounting principles,
conventions and past experiences.(2) Financial Statements emphasize
to disclose only monetary facts, i.e., quantitative information(3)
Financial Statements disclose only the historical information. It
does not consider changes in money value, fluctuations of price
level etc. (4) Influences of personal judgments leads to
opportunities for manipulation while preparing of financial
statements.
(5) Information disclosed by financial statements based on
accounting concepts and conventions. It is unrealistic due to
difference in terms and conditions and changes in economic
situations.
Types of Financial Statements :The four main types of financial
statements are:Statement of Financial Position (Balance
Sheet)Statement of Activities (Income Statement)Statement of
retained earningsStatement of Cash Flows
Statement of Financial Position (Balance Sheet):It is comprised
of the following three elements:1.Assets: Something a business owns
or controls (e.g. cash, inventory, plant and machinery,
etc.)2.Liabilities: Something a business owes to someone (e.g.
creditors, bank loans, etc.)3.Equity: What the business owes to its
owners. This represents the amount of capital that remains in the
business after its assets are used to pay off its outstanding
liabilities. Equity therefore represents the difference between the
assets and liabilities.
Statement of Activities (Income Statement):
Income Statement is composed of the following two
elements:1.Income: What the business has earned over a period (e.g.
sales revenue, dividend income, etc.)2.Expense: The cost incurred
by the business over a period (e.g. salaries and wages,
depreciation, rental charges, etc.)Net profit or loss is arrived by
deducting expenses from income.
Statement of retained earningsThe movement in owners' equity is
derived from the following components:Net Profit or loss during the
period as reported in the income statementShare capital issued or
repaid during the periodDividend paymentsGains or losses recognized
directly in equity (e.g. revaluation surpluses)Effects of a change
in accounting policy or correction of accounting error
Statement of cash flow
The movement in cash flows is classified into the following
segments:Operating Activities: Represents the cash flow from
primary activities of a business.Investing Activities: Represents
cash flow from the purchase and sale of assets other than
inventories (e.g. purchase of a factory plant) Financing
Activities: Represents cash flow generated or spent on raising and
repaying share capital and debt together with the payments of
interest and dividends. THANK YOU
