Introduction
Financial accounting that is about reporting and summarizing the transactions of business and provide an accurate financial reports or financial statements such comprehensive income and finacial position (Averkamp, 2014). However, if investing in a business and want to acquire more profit, the financial statemnet of company is must be analysed before taking a decision. This essay will explains that financial statements between two companies about four years comprehensive income statements and four years statements of financial position. Then, it will be give a answer which one is best to invest.
Definition
Comprehensive income is the change in company's equity (net assets) in a period of time from transactions with owners. All of statements such as expenses and income recognized. Comprehensive income has a good example that is losses or profits on foreign currency transactions. The purpose of the statement of comprehensive income shows that the results and financial performance of specific company operated or other factors during a period (Ready Ratios (2014). Furthermore, according to the financial analysis of comprehensive income is defined as to evaluate operating events and the sum total of all financial situation which have changed the value of an owner's interest in the business.
The statement of financial position is as same as with the balance sheet. The statements are generally used by large and samll companies. The financial positon reflects that the result of financial position and the financial status of enterprise at a specific date. Also, it will reports the difference in their totals and financial entity's assets, liabilities (Averkamp, 2010). For instance, thare are four statements are income statem...
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... between redemption and share capital issues, net profit or loss, that need recognized in equity. Secondly, statement of cash flow mainly linked to financial position of the cash flow, due to it analyze the part of the balance sheet which is changes in cash and cash equivalents balance, the effect of equity reserves and debt.
Conclusion
To sum up, this essay has illustrated the similar and difference of the statement of comprehensive income and statements of financial position, and the relationship both of them. It have been arguement which caculation method is best when invest in a business. Personslly speaking, the statement of financial position is the most effective method to explain the financial condition of a company. Nevertheless, another one comprehensive income statement also as sane is indispensable, because financial position besed on income statement.
A dramatic increase in the demand of the financial statements by external users made the reporting entities’ annual reports to meet the objective of general purpose financial reporting and qualitative characteristics of useful financial. According to the IASB Conceptual Framework, it superseded the Framework for the Preparation and Presentation of Financial Statements. As a result, this report could discuss the conceptual framework for financial statements and compare with Bega’ current accounting practice of Property, Plant and Equipment under Accounting Standard AASB116. Then, this report will suggest some actions for Bega to improve its current accountin...
Consolidated statement of profit or loss and other comprehensive income:- The purpose of this statement is to present total group earnings as a single entity without dividing the earnings attributable to nom-controlling shareholders and owners of the parent company. The revenues, expense and taxation of all companies included in the group are consolidated as a single entity regardless of the parents ownership in the subsidiary companies in order to provide results of the group as a whole. Similarly the entity concept is applied to consolidate all the components of other comprehensive income that are not permitted to be included in the profit or loss section. Consolidated comprehensive income is particularly useful when understanding the changes in the company’s fair value of assets.
Analyzing financial statements is an important part of decision making because valuation of profits and losses statements are the most important drivers in business. They are used to diagnose weak spots in the current strategy in an internal perspective and play a key role in making decisions to mitigate against such losses and helps in achieve it long term objective
ABC LTD COMPREHENSIVE INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2012 NOTE 2012 Revenue 2 828,500 Cost of sales 3 (460,000) Gross profit 368,500 Other income 4 2,500 Operating expenses 5 361000 Profit before income tax 10000 Income tax expense (30%) 3,000 Profit for the year 7000 Other comprehensive income change in revaulation surplus 38500 Other comprehensive income for the year, net of tax 38500 Total comprehensive income for the year 45500 ABC LTD STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 JUNE 2012 NOTES 2012 ASSETS Current assets Cash and cash equivalents 6 100500 Trade and other receivables 7 45,200 Inventories 8 87700 Other current assets 9 7000
The statement of cash flows reports a firm’s major cash inflows and outflows for a period. This statement provides useful information about a company’s ability to generate cash from operations, maintain and expand its operating capacity, meeting its financial obligations, and pay dividends. There are three types of activities to look at in this statement, which are cash flows from operating activities, investing activities, and financial activities (3, 2005).
This essay is going to discuss the perception that financial accounting appears to be transforming. It demonstrates that why the financial accounting theories appears and the difference between descriptive and prescriptive methods of research; the reason why researches might shift from one method to another and how the accounting theories influence by some famous researchers contribution such as Paton, Littleton and Chambers.
The Purpose of Financial Statements The financial statements of a business are used to provide information about the status of the business, set performance targets and impose restrictions on the managers of the firm as well as provide an easier method for financial planning. The financial statements consist of the Profit and Loss Account, Balance Sheet and the Cash Flow Statement. There are four areas of information, which we can collect from a company's financial statements. They are: Ÿ Profitability - This information comes from the Profit and Loss account. Were we can compare this year's profit with the previous years.
The statement of the financial position is also known as balance sheet has shown the accounting equation, Assests = Liabilities + Equity. The statement of the financial position shows the current assets, liabilities and equity owned by a business during an accounting period.
A largely accepted language is required for a business or organization to effectively communicate its results and position to stakeholders, which is why accounting has come to be known as the "language of business". Accounting is really the means for providing financial information to others. Financial analyst then take the data the accountants have compiled in the form of reports, and make educated guesses at what their company should do next. David ballast (1996) stated, "The fact remains that accounting and finance are the primary tools for reducing business problems and opportunities to a common denominator, setting goals, measuring results, and making decisions." (p. 1)
"The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions."[Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are directly related to an organization's financial position. Reported income and expenses are directly related to an organization's financial performance.
Balance sheets are very important for parties like suppliers, investors, competitors, customers, etc. to know the company’s position, company’s strength and company’s weaknesses. Balance sheets helps to ascertain the amount of capital employed in the business so that we can further calculate different types of ratios. Some important objectives of preparing balance sheets are:
Accounting systems is very important tool for any type business such as corporation, Partnership, and Sole proprietorship. Accounting systems is also referred to as Accounting Information system. Accounting Information systems is process of collecting and processing transaction data and communicating with decision makers. Every business should have Accounting Information system because it helps us answer questions such as should we expend our company overseas? Do we have enough payroll for our employees? Accounting information systems can also help us understand what types of inventory we should use. As we learn more about accounting information systems throughout this paper we will discuss basic structures of assets, liabilities, and stock holder’s equity. We will also discuss four basic financial statements and effects of Revenues, expenses and dividends. Finally we will also discuss difference between net income and cash flow.
Income statement-: Income statement is the financial statement that measures a company 's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities.
The purpose of this document is to describe the nature, purpose and scope of accounting and it deliberately explains the details of each category in accounting. Accounting involves in preparing financial documents of an entity by analyzing, verifying, and reporting this records. It emphasizes its major characteristic role in field of banking and finance, with a mixture of supportive sub topics.
Gitman (2003) had mentioned in his own book about the third type of financial statements called Cash Flow statement. It is an overview of the business’s work over a specific period. This statement equips perception into the company’s operating, buying, and financing the cash flow. Moreover, it considers as lifeblood of a business. The thing that effects on the cash flow is depreciation. To add in, there are three types of cash flow. Operating flows, investment flows, financing