Introduction to Financial Statements

Introduction to Financial Statements

• Importance of financial measures• Financial accounting and management accounting• The four types of accounts• Three financial statements


Objectives and overview

Importance of financial measures

Outlines the reasons for financial measures, introducing the three main types offinancial statements and their different purposes.

Financial accounting and management accounting
Defines the different branches of accounting: the auditing profession as a means of controlling business; in business accounting, financial accounting as preparing accounts and reports, and management accounting as providing comprehensive accounts for internal use only.

The four types of accounts
Identifies and describes the four main types of account in which financialtransactions are recorded: income, expense, asset and liability accounts.

Three financial statements
States the primary purpose of financial statements: the Profit and Loss Account, the Balance Sheet and the Cash Flow Statement.

Accounting conventions
Introduces the four main accounting conventions of Matching, Going Concern,Prudence and Consistency, and the reasons for having such conventions