Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) 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:
- The Income Statement also known as the Statement of Comprehensive Income and formerly and the Trading and Profit and Loss Account
- The Statement of Financial position formerly known as the Balance Sheet
- Cash Flow Statement otherwise known as the Statement of Cash Flows
- The Statement of Changes in Equity
- 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 learn more about the Balance Sheet/Statement of Financial Position click here
- To learn more about the Trading and Profit and Loss Account click here
To access more topics go to the Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes.