FINANCIAL STATEMENTS GCE PROFESSIONAL BUSINESS

Transcript:FINANCIAL STATEMENTS GCE PROFESSIONAL BUSINESS:
FINANCIAL STATEMENTS GCE PROFESSIONAL BUSINESS SERVICES 1 Financial Statements Financial statements are the financial records that a professional business services firm may prepare on behalf of a client business to summarise the financial position. Normally comprises 2 statements: Income statement Statement of financial position 2 INCOME STATEMENT Purpose: to summarise the profit/loss of the business for the accounting period Standard layout adopted to show key information: Sales Revenue Cost of Goods Sold Gross Profit/(Loss) Expenses Net Profit/(Loss) 3 Accounting Terminology: Income Statement Sales Revenue is income earned in the accounting period from trading activities. Cost of Sales is a subsidiary calculation required to determine the actual cost of selling products – a mathematical calculation using the following formula: Cost of sales = opening inventory + purchases – closing inventory 4 Accounting Terminology: Income Statement Gross Profit or Loss is the difference between Sales Revenue and Cost of Sales. Expenses are costs of running the business during the accounting period. Net Profit or loss is the total income in the period less the total expenses incurred in the accounting period. 5 FINANCIAL STATEMENT 6 STATEMENT OF FINANCIAL POSITION Purpose: to summarise the financial position for the period in terms of assets/liabilities Standard layout adopted to show key information: Non-current assets Current assets Owner’s Capital (Equity) Non-current liabilities Current Liabilities 7 Accounting Terminology: Statement of Financial Position Non-Current Assets: Assets that the business expects to retain ownership of, for a period of at least one year (e.g. factory/vans). Current Assets: Assets that the business expects to turn to cash within a one-year period (closing inventories/trade receivables/prepayments/cash). 8 Accounting Terminology: Statement of Financial Position Non-Current Liabilities: Debts A business is required to meet in a future accounting period. Example: bank loan Current Liabilities: Liabilities that the business expects to pay within a one-year period. Example bank overdraft Equity: Term used to define the value of funds within the business which can be attributed to the owner. 9 FINANCIAL STATEMENTS G Grantley Consulting Statement of Financial Position as at 31 December 2017 £ Non-current assets 132000 Current assets 7250 Total assets 139250 Owners Equity 77000 Non-current Liabilities 60000 Current Liabilities 2250 Capital Employed 139250 10 FINANCIAL STATEMENTS Limited company financial statements tend to be more complex. Different layout adopted: expenses are often summarised into two main headings – Selling & Distribution Expenses and Administration Expenses separate disclosure of interest (finance) costs, dividends and tax