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Unit 10 – Classified Financial Statements

Unit 10 – Classified Financial Statements. Purpose of Financial Statements. Is to provide financial information about a company to owners, investors, management, creditors, and government. Provide more information/in a way that is more easily interpreted:

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Unit 10 – Classified Financial Statements

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  1. Unit 10 – Classified Financial Statements

  2. Purpose of Financial Statements • Is to provide financial information about a company to owners, investors, management, creditors, and government. • Provide more information/in a way that is more easily interpreted: • Classifying items on statements into special categories. • Which debts must be paid within a year? • Is there sufficient cash (or assets) on hand to pay debts? • Which debts must be paid in future years? (Figure 5.6 – Page 173)

  3. Assets • Current Assets • Is cash or some other asset that, in the normal course of operations, will be converted to cash or sold or consumed within the year. • Listed in order of liquidity.

  4. Assets • Fixed Assets • Are assets that have a long life (over one year). • “plant and equipment” or “capital assets” • Longest life fixed assets listed first • Recorded using the price at which they were purchased (cost principle)

  5. Liabilities • Current Liabilities • Are liabilities due to be paid within a year. • Listed in order that they are to be paid • Long-Term Liabilities • Are liabilities that are not due to be paid for more than one year. • Examples: Loan payable in 2 years Mortgage payable in 25 years

  6. Owner’s Equity • Increases • Net income • Decreases • Net loss • Owner withdraws assets from the business ** See 2 examples (Pages 178-179) …Fig. 5.7, 5.8

  7. Supporting Statements & Schedules • Statement of Owner’s Equity – describes the changes in owner’s equity for the accounting period. • Gives details of owner’s equity • Prepared separately from the balance sheet • Date (for month ended) • Figure 5.9 (Page 179)

  8. Schedule of Accounts Receivable • Supporting schedule – provides details about an item on a main statement. • Example: Schedule of Accounts Receivable • List of the individual accounts receivable and the amounts owed. ** Supporting schedules and statements may be prepared whenever the accountant feels they would provide additional useful information for the readers of the financial statements.

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