会计英语unit11financialstatements.ppt

Unit 11,Financial Statements,Ⅰ.Balance Sheet Ⅱ.Income Statement Ⅲ.Cash Flow Statement,2,Financial Statements,For a business enterprise, all the relevant financial information, presented in a structured manner and in a form easy to understand, are called the financial statements. They typically include four basic financial statements Balance sheet: referred to as statement of financial position or condition, reports on a company's assets, liabilities, and ownership equity at a specific time. Income statement: referred to as Profit and Loss statement (or a “P&L“), reports on a company's income, expenses, and profits over a period of time. Statement of retained earnings: explains the changes in a company's retained earnings over the reporting period. Cash flows Statement : reports on a company's cash flow activities, particularly its operating, investing and financing activities.,3,,For large corporations, these statements are often complex and may include an extensive set of notes to the financial statements and management discussion and analysis. Notes to financial statements are considered an integral part of the financial statements. All the financial statements are built to be used together to present a complete picture of a company’s finance.,4,Purpose of financial statements,“The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. “ Reported assets, liabilities and equity are directly related to an organization's financial position. Reported income and expenses are directly related to an organization's financial performance. Financial statements should be understandable, relevant, reliable and comparable.,5,,Financial statements are intended to be understandable by readers who have “a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently. “ Financial statements may be used by users for different purposes. Owners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis is performed on these statements to provide management with a more detailed understanding of the figures. They are also used as part of management's annual report to the stockholders.,6,,Employees need these reports in making collective bargaining agreements (CBA) with the management, in the case of labor unions or for individuals in discussing their compensation, promotion and rankings. Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are often used by investors and are prepared by professionals (financial analysts), thus providing them with the basis for making investment decisions. Financial institutions (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and other significant expenditures.,,,,,7,,Government entities (tax authorities) need financial statements to ascertain the propriety and accuracy of taxes and other duties declared and paid by a company. Vendors who extend credit to a business require financial statements to assess the creditworthiness of the business. Media and the general public are also interested in financial statements for a variety of reasons,8,Case,Fruit Juice & Sugar,Diversified products, such as power generation, jet engines, medical technologies and services,Milk,9,Ⅰ.Balance Sheet,10,Assets = Liabilities + Owner’s equity,The balance sheet is the fundamental and backbone of the whole accounting and reporting system. It provides a snapshot of the business’s financial position, such as assets, liabilities and owner’s equity at a specific time.,11,1.Functions of Balance Sheet,(1)Evaluating and predicting short-term solvency of a business Solvency means the financial ability of a company to pay debts when they become due. (2)Evaluating and predicting capital structure and long-term solvency Long-term solvency of a business is determined by both its profitability and capital structure.,12,2.Format of Balance Sheet,The balance sheet has to contain: Name of the business Name of the financial statement Date of the report The financial items it reflects,Huntnington Galary Balance sheet December 31,2009,13,Assets, Liabilities and owner’s equity are listed on a balance sheet, and according to their liquidity, the items are subcategorized and listed separately.,,14,,15,,,16,,,17,,,18,,19,,20,Ⅱ.Income Statement,21,Profit = Revenues - Expenses,Income statement is a summary of the operating results of a business for an accounting period. It provides information about revenues generated and expenses incurred. The difference between the revenues and expenses is identified as the net in。