Week 4 & 5 Financial Reports

Accounting Conventions Monetary Convention Accounting entity convention Going concern Accounting period convention Profit realisation convention Conservative doctrine Disclosure convention

Classification of Transactions Assets Liabilities Proprietorship Revenue Expenses

The Balance Sheet Equation Assets = Liabilities + Proprietorship Proprietorship = Assets – Liabilities Liabilities = Assets - Proprietorship

Categories of the components of the Balance Sheet Assets Current Assets Fixed Assets Non-Current assets Liabilities Current Liabilities Non – Current Liabilities (long term)

Categories of the components of the Balance Sheet Proprietorship Capital Retained earnings Net Profit

Profit and Loss Statement Profit = Revenue – Expenses Matching the expenses with the revenue of a particular period of time.

Further elements of the Profit and Loss Statement Sales Cost of Goods sold Gross Profit Operating Expenses Net Profit

Cost of Goods Sold The cost of the trading stock used up in the selling process. Opening Stock + Purchases – Closing Stock = Cost of Stock used O/S + Purchases – C/S = COGS