ZIMSEC O Level Business Studies Notes: Business Finance and Accounting: Financial statements/ Final Accounts

  • The accounting function exists mainly to record, analyse and present financial information
  • Presentation of financial information involves the preparation of what are known as final accounts
  • They are called final accounts because they are the last accounts to be prepared
  • They are also made at the end of each financial period
  • What constitutes a financial period differs from organisation to organisation but it is usually one year long
  • So at the end of the financial year final accounts are prepared
  • Final accounts are also known as financial statements
  • They are made up of the following financial statements:
    1. The Income Statement also known as the Statement of Comprehensive Income and formerly and the Trading and Profit and Loss Account
    2. The Statement of Financial position formerly known as the Balance Sheet
    3. Cash Flow Statement otherwise known as the Statement of Cash Flows
    4. The Statement of Changes in Equity
    5. Explanatory notes to accompany these statements
  • At ordinary level you should only concern yourself with the Balance Sheet (Statement of Financial Position) and the Income Statement (Trading and Profit and Loss Account)
  • The others are beyond the scope of the ordinary level syllabus
  • These two final accounts are made principally to determine the performance of the organisation during the year and to show the financial position of the business at year end
  • Budgeted financial statements can also be prepared
  • These show the budgeted position of the firm at a specific point in the future
  • Assumptions and models are used to create these budgeted financial statements

NB

To access more topics go to the O Level Business Notes