Financial Statements

Financial statements are those that

present financial information to various
interested parties.
There are various types of financial
statements, but only two of them are
important from the point of view of
business finance.
These are (1) balance sheet (2) the
profit and loss statements

Balance SHEET
Balance sheet is the statement
produced periodically, normally at the
end of financial year, showing an
organizations assets, liabilities, and
the interest of the owners.

Assets
Asset section of the balance sheet
shows everything that the firm owns
and which has monetary value. Assets
are classified into four items and are
presented in the balance sheet in the
order of how quick they can be
converted into cash.

Classification of Assets

Current Assets are composed of cash, ban

deposits, and other items readily convertible into
cash like accounts receivable, stocks and work in
process, and marketable securities;
Trade Investments are composed of investments in
subsidiary or associated companies;
Fixed Assets show the firms ownership of property
like land, building, plan and machinery, equipment,
vehicles, furniture and fixtures, all valued at cost
less depreciation written off: and
Intangible Assets items present goodwill, patents,
copyright which are attributed to the firm.

Liabilities
Liabilities section of the balance sheet
shows the profile of the debts of the
company. They are classified into
several items and are presented first
and referred to as current liabilities.
Long term liabilities are those which
are payable after one year.

Common Liability

Accounts Payable are usually composed of debts

payable within a few days, weeks, or months, like those
incurred in the purchase of raw materials and stocks.
Loans and Notes payable are debts evidenced by
promissory notes and oftentimes backed by collaterals.
Creditors of this type of liability are composed of
banks, suppliers, financing companies and the public.
Advances from customers. Sometimes, customers are
required to make down payments before orders are
processed. Inasmuch as this is not yet earned by the
company, they are considered liabilities.
Accrued expenses represent obligations which have
been incurred but not yet paid.

Mortgage Payable comprises borrowings and other

sources of bonds. This item also represents long
term-debts and is usually secured by land,
buildings, or equipment.
Bonds Payable. When a large amount of long term
debt is sought by the firm from a large number of
creditors, bonds are usually issued. The amount
borrowed is divided in denominations like Php500,
Php1000, Php5000, and individual bond certificates
are issued in these amounts. Each creditor holds
the bond, or the promise to pay. For his share of
the companys debt.

Net Worth
The net worth section of the balance sheet
shows the interest of the owner or owners
in the company.
In a single proprietorship, the owner's
interest usually appears as a single
account, for instance, Isabelo Musngi,
Capital. This represents sums invested by
the owner, which is increased by profits
and decreased by losses and withdrawals.