ACC1701: Accounting for Decision Makers - 2) Overview of Financial Statement

2-1: Four Major Financial Statements

Balance Sheet (B/S) - Statement of Financial Position
Income Statement (P/L) - Statement of Comprehensive Income
Statement of Change in Equity (S/S) - Statement of Retained Earnings
Cash Flow Statement (C/F) - Statement of Cash income and outflow 

2-2: Income Statement (P/L)

P/L reports on the operating activities of the firm for a period which is prepared for the period ended. 

Categories in P/L  

• Sales (or Revenue) - 売上高

• Operating Expenses - 営業費用

• Gains / Loss - 営業外費用

• Non - Operating items - 特別費用

• Income tax expense - 税費用

Important Equation

Profit After Tax = Sales - Expense 

2-3: Balance Sheet (B/S)

Shows assets, liabilities and equity at a particular point in time (as on xxxx/xx/xx).

Categories in B/S

• Asset 

  • Non-Current Asset - 固定資産

  • Current Asset - 流動資産

• Liabilities

  • Non-Current Liabilities - 固定負債

  • Current Liabilities - 流動負債

• Shareholder Equity - 株主資本

Important Equation

Shareholder Equity = Asset - Liabilities 

2-4: Statement of Change in Equity (S/S)

Describes the change in the book value of shareholders' equity. 

Categories in S/S

• Retained Earnings(RE) are cumulative net income (or loss)

  • RE will increase when recording net income 

  • RE will decrease when dividends are distributed

  • End RE =  Beginning RE + Net Income - Dividends

2-5: Cash Flow Statement (C/F)

Cash Flow from Operating Activities (CFO)

CFO measures the cash inflow from selling goods and services, and cash outflow on the operating expenses

Cash Flow from Investing Activities (CFI)

CFI measures the cash outflow from buying nonoperating assets, like short-term investments, PPE, Patents, etc, and Cash inflow from the sale of nonoperating assets

Cash Flow from Financing Activities (CFF)

CFF measures the cash outflow to repay debt, repurchase shares, and pay dividends and cash inflow from new debt and new shares issued.