Structure of Basic Financial Statements
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ScribdTranslationsStructure of Basic Financial Statements
Translated by
ScribdTranslationsHow is each EFB structured, that is, what should its format be and how is it
do they relate?
The basic financial statements are:
Balance sheet
Income Statement
Statement of Changes in Equity
Statement of changes in financial position (sources and uses of funds)
Statement of cash flows
Balance sheet
It is the accounting document that reports on a specific date the situation
company's financial situation, clearly presenting the value of its properties
and rights, their obligations, and their capital, valued and prepared according to
generally accepted accounting principles.
Only real accounts appear on the balance sheet, and their values must correspond.
exactly to the adjusted balances of the general ledger and subsidiary books.
The balance sheet should be prepared at least once a year and dated as of the 31st.
of December, signed by those responsible:
Accountant
Fiscal auditor
Manager
Cuando se trate de sociedades, debe ser aprobado por la asamblea general.
Its structure is presented below:
Balance sheet (outline)
Active $……. $…….
Current asset
Available
Debtors
Inventories
Non-current asset
Property, plant, and equipment
Intangibles
Deferred
Valuations
Total assets
Passive
Current liabilities
Financial obligations
Suppliers
Accounts payable
Taxes, levies, and fees
Labor obligations
Deferred
Non-current liabilities
Other long-term liabilities
Bonds and commercial papers
Total liabilities
Heritage
Share capital
Capital surplus
Reservations
Revaluation of assets
Usefulness of exercise
Total assets
Income statement or profit and loss statement
It is a complementary document where detailed and orderly information is provided.
how the profit of the accounting period was obtained.
The income statement is composed of nominal, temporary or
of results, that is, the accounts of income, expenses, and costs. The values must
to correspond exactly to the values that appear in the general ledger and their
auxiliaries, or to the values that appear in the profit and loss section of
the worksheet.
Income Statement Format
INCOME STATEMENT (Scheme)
SALES ———
Returns and discounts
OPERATING INCOME
(-) Cost of sales
GROSS OPERATING PROFIT
(-) Operating sales expenses
(-) Administrative Operating Expenses
OPERATING UTILITY
(+) Non-operational income
(-) Non-operational expenses
NET INCOME BEFORE TAXES
(-) Income and complementary tax
LIQUIDITY UTILITY
(-) Reservations
USEFULNESS OF EXERCISE
Statement of changes in equity or surplus statement
It is the financial statement that shows in detail the contributions of the partners and
the distribution of the profits obtained in a period, in addition to the application
of retained earnings in previous periods. This shows separately the
heritage of a company.
It also shows the difference between equity (net worth) and capital.
social (contributions from partners), determining the difference between total assets and the
total liabilities, including the contributions from partners in the liabilities.
This is the structure of the statement of changes in financial position for
limited liability companies:
STATEMENT OF CHANGES IN FINANCIAL POSITION (Scheme)
SURPLUS —————
CAPITAL SURPLUS
Prime in the placement of fees or interest parts
Merchant credit
RESERVATIONS
Legal reserve
Statutory reserves
Occasional reservations
RESULTS OF THE EXERCISE
Benefits of exercise
RESULTS OF PREVIOUS EXERCISES
Accumulated profits or surplus
(o) Accumulated losses
SURPLUS FROM VALUATIONS
Of investments
Property, plant, and equipment
TOTAL SURPLUS
This is the structure for joint-stock companies:
STATEMENT OF CHANGES IN FINANCIAL POSITION (Outline)
SURPLUS ———-
CAPITAL SURPLUS
First in placement of shares
Commercial credit
RESERVATIONS
Legal reserve
Statutory reserves
Occasional reservations
REVALUATION OF ASSETS
Of social capital
Of capital surplus
Of reservations
From the results of previous exercises
DIVIDENDS DECLARED IN STOCKS
RESULTS OF THE EXERCISE
Usefulness of exercise
RESULTS OF PREVIOUS EXERCISES
Accumulated profits or surpluses
(o) Accumulated losses
SURPLUS FROM VALUATIONS
About investments
Property, plant, and equipment
TOTAL SURPLUS
Cash Flows
To represent the cash flows of a project, it is often used the
timelines. These schemes are particularly useful when the flows of
Cash is complex, although it can also be useful when the
Cash flows are not that complicated to illustrate more clearly their
behavior throughout the project's lifecycle.
The scheme would be as follows:
Usefulness of exercise:
Entries that have no effect on cash.
(+) Depreciaciones:
(+) Amortizations:
(-) Income from recoveries:
Variation in items related to operating activities
(+) Increase in labor obligations:
(+) Increase in taxes payable:
(+) Increase in accounts payable:
Increase in inventories:
(-) Increase in accounts receivable:
Cash generated from operating activities =
HOW THE FINANCIAL STATEMENTS ARE RELATED
The Securities and Exchange Commission requires that all public companies publish
three financial statements. These reports provide information about the
company performance. The balance sheet provides details about assets and
the company's liabilities, the income statement provides information about the
income and expenses of the company and, the cash flow statement provides a
overview of the sources and uses of funds of companies. Each report
supports the other.
.
CONCLUSION
En este trabajo de investigación se conoció la importancia de preparar Estados
Basic financial concepts for industrial companies in addition to understanding each one of
the formats of each of them.
BIBLIOGRAPHY
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Common questions
Powered by AIIn joint-stock companies, asset revaluation impacts shareholder equity by adjusting the value of assets on the balance sheet, which in turn affects capital surplus and reserves. This can lead to an increase in reported equity when asset values rise, thus enhancing the company's book value and improving investor perceptions. However, regular revaluation against market values is necessary to ensure transparency and accuracy in financial reporting .
The statement of changes in financial position varies between limited liability and joint-stock companies primarily in terms of capital surplus and equity structure. For joint-stock companies, there is an emphasis on the placement of shares and revaluation of social capital and capital surplus. In contrast, limited liability companies focus more on accounts like merchant credit and reservations related to previous exercise results. These differences reflect varied approaches to managing capital contributions and reserves .
Maintaining accurate financial statements, especially the balance sheet, involves challenges like ensuring valuation accuracy of assets and liabilities, reconciling discrepancies with general ledger entries, and adhering to generally accepted accounting principles (GAAP). Accurate differentiation between current and non-current items, rigorous adjustments, and reconciliation with subsidiary ledgers are critical to prevent misreporting errors, misaligned debt structure, or misstated equity values .
Regular preparation of financial statements, like annually, is critical for timely reflection of financial performance and health, enabling informed decision-making and compliance with regulatory requirements. Failure to prepare these statements regularly may lead to outdated financial data, compromised financial oversight, increased risk of financial discrepancy, and non-compliance with statutory or fiscal obligations, potentially resulting in legal penalties or loss of investor confidence .
Non-operational items, such as non-operational income and expenses, affect net income by introducing financial results not derived from main business activities. Differentiating them is important for accurately assessing the company's primary operational efficiency and distinguishing between gains or losses from everyday operations and those from peripheral activities. This differentiation enhances clarity for stakeholders evaluating sustainable earnings and the financial health of the business .
Changes in accounts payable and accounts receivable impact the cash flow statement by affecting the operating cash flow section. An increase in accounts payable indicates that less cash has been paid out, thus increasing cash flow, while an increase in accounts receivable indicates that less cash has been received, thus decreasing cash flow. These fluctuations help analyze the company's liquidity and operating efficiency .
Reserves in the statement of changes in equity serve as allocations of retained earnings for specific purposes, reflecting prudent financial management. Legal reserves are retained earnings mandated by law, statutory reserves are those required by corporate regulations, and occasional reserves are set aside for unforeseen needs. These reserves help in managing financial risk and ensuring stability, representing part of the shareholders' equity that is preserved for future use .
The cash flow statement is crucial for tracking the inflows and outflows of cash within a company, offering insights into the company's operational efficiency, liquidity, and financial flexibility. It interacts with the income statement by adjusting the accrual-basis net income to reflect actual cash movements, and aligns with the balance sheet by showing changes in cash impacting asset and liability balances. This integration aids in assessing the company's ability to generate cash and fulfill financial obligations .
The income statement and balance sheet complement each other by providing a complete picture of financial performance and position. The income statement details how income, expenses, and resulting profit are derived during a specific period, influencing retained earnings reflected within equity in the balance sheet. As profits or losses from the income statement are transferred to the equity section of the balance sheet, these statements provide an integrated view of financial health and operational results .
A balance sheet is structured to report on a company's financial position at a specific date, presenting the values of assets, liabilities, and equity. The key components include assets (current and non-current), liabilities (current and non-current), and equity. Current assets contain items like available cash, debtors, and inventories, while non-current assets include property and equipment. Current liabilities encompass financial obligations and accounts payable, whereas non-current liabilities include bonds. Equity is represented by share capital and reserves. This structure provides a snapshot of what the company owns and owes, and the owner's stakes in the company .