BAT4m
Unit 1: Chapter 1
September 9 2014
Quiz on Friday September 12, 2014
Financial Statements

There are 4 types of financial statements.
Income Statement: presents revenues and
expenses. It shows net income or net loss for
a specific period of time.
Balance Sheet: reports the assets, liabilities
and owner’s equity at a specific time.
Statement of owner’s equity
Cash flow statement
Income Statement
It presents revenues and expenses.
 It shows net income or net loss for a
specific period of time.
 3 titles:
 When: It shows a time period rather than
a specific date. For example, “Month
ended September 30, 2008” What kind of
time period does this income statement
cover?

Income Statement
The main purpose : to show profitability
of the company’s operation over a specific
period of time.
 Net Income = Revenue – Expense
 What are the most popular IS time period
for public corporation? Quarterly

Income Statement

What is the most popular IS time period
for small business? Annually (once a year)

Do some corporations produce their IS
every month? Yes
Balance Sheet
It reports assets, liabilities and
owner’s equity at a specific time. For
example, “September 30, 2008”
 3 headings:
 BS is like a “snapshot of the company’s
financial condition.” What does this
mean?

Balance Sheet
What is the order of ALO in BS?
Assets first, liabilities next and OE
 How do asset accounts listed in BS?
 In the order of liquidity: Cash, AR,
Inventory, Supplies, Long term assets
 How do liability accounts listed in BS?N
 AP first, NR, Bank Loan, Mortgage

Statement of Owner’s Equity
SOE reports the changes in OE for a
specific period of time. “Month ended
September 30, 2008”
 3 titles:
 First line: beginning balance of the capital
account. How would you get this number?
 Ending balance of last period SOE

Statement of Owner’s Equity
Next lines: + Owner’s investments + the
net income and - drawings
 How would you get these numbers?
 SOE indicates why OE has increased or
decreased during the period.
 Why would CRA mandate businesses to
make SOE? So they can accurately
calculate corporate income tax and
personal income tax.

Cash Flow Statement
It gives information about the cash
receipts and cash payments for a specific
period of time.
 It reports the following:
• The cash inflows and outflows from investing

•
transactions (e.g purchasing machine)
The cash inflows and outflows from financing
transactions (e.g. borrowing and repayment of
debt and withdrawls of owner
Cash Flow Statement

It reports the following:
• The net increase or decrease in cash during
•
the period.
The ending balance of cash amount at the end
of the period
Cash Flow Statement

It answers the following questions:
• Where did the cash come from during the
•
•
period?
What was the cash used for during the period?
What was the change in the cash balance
during the period?
Class work / Homework
P20 Transaction Analysis (students will
show their works on the board)
P35 E1-13
P37 P1-5A