Diploma in Bookkeeping
Elements of the
AFS
2
Contents
3 Lesson outcomes
3 Introduction
4 Different strokes
5 One size does not fit all
7 The sum of the parts
8 References
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Lesson outcomes
By the end of this lesson, you should be able to:
• List the types of statements.
• Describe the elements of the annual financial statements.
• Explain the link between the statements.
• List the different names for the statements.
Introduction
Aristotle said the whole is greater than the sum of its parts. This is applicable to businesses in that there is great value in all
the departments in a business working together and working well. And similarly with annual financial statements, each
statement is very valuable but when read altogether, the information becomes far more valuable and far more useful. This
module will provide you with all the tools you need to extract the value from annual financial statements for easy analysis
and interpretation.
“I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you
made them feel.”
- Maya Angelou
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Different strokes
Types of AFS
Proforma annual financial statements
• Estimates and projections.
• Projecting impact of transactions or events.
• For merger or acquisition.
• Risk analysis.
• Can be very inaccurate.
Interim annual financial statements
• Same content as the final AFS.
• For a shorter period of time.
• Regular monitor performance.
• Latest view of financial health.
• Review cash flows.
Consolidated annual financial statements
• Prepared for a group.
• Branches, subsidiaries.
• Report up into the holding company.
• Separate AFS.
• IFRS guidance.
AFS for small businesses
• Not as detailed.
• Less onerous reporting requirements.
• Reassess the strategy.
• Strengths and weaknesses.
• Operational and financial goals.
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One size does not fit all
Recap of the elements
• PPE.
• Receivables.
• Payables.
• Cash and cash equivalents.
• Accruals, deposits and prepaids.
• Owner’s equity.
• Contingencies.
Four key statements
• Balance sheet.
• Income statement.
• Retained earnings.
• Cash flow.
What is the link?
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What is in a name?
• Statement of financial position.
• Statement of profit and loss and other comprehensive income.
• Statement of changes in equity.
• Statement of cash flows.
• Notes to the financial statements.
Did you know?
• 8% of the worlds cash is physical in nature.
• Germans used money as wallpaper.
• More monopoly money is printed annually than real money.
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The sum of the parts
Components
• Title page
• Content’s page
• General information
• Director’s report
• Audit report
• Statements
• Accounting policies
• Note disclosure
• Additional notes
• Detailed income statement
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References
• Berry, T., n.d. How to cash flow forecast. [Online] Available at:
[Link]
• Bragg, S., 2020. What is cash flow forecasting? [Online] Available at:
[Link]
• Business Victoria, 2020. Cash flow forecasting. [Online] Available at:
[Link]
forecasting
• CFI, n.d. Forecasting cash flow. [Online] Available at:
[Link]
• CFI, n.d. Monthly cash flow forecast model. [Online] Available at:
[Link]
model/
• Freeman, D., 2008. Industrial: Sales forecast. [Online] Available at:
[Link]
• Gillespie, M., 2018. What is cash flow forecasting? [Online] Available at:
[Link]
flowforecasting/#:~:text=A%20cash%20flow%20forecast%20is%20a%20projection%20of,cash%20flow%
20forecast%20is%20called%20cash%20flow%20forecasting
• Skrobak, J., 2013. Sales & Operations Planning. [Online] Available at:
[Link]
• Standard Bank, n.d. Free cash flow forecast spreadsheets. [Online] Available at:
[Link]
[Link]
• tutor2u, n.d. Cash flow forecasting - example. [Online] Available at:
[Link]
• University of Exeter, 1998. Famous forecasting quotes. [Online] Available at:
[Link]
[Link]#:~:text=%20Famous%20Forecasting%20Quotes%20%201%20%22Those%20w
ho,serves%20as%20a%20warning%20of%20the...%20More%2
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