Components of Financial Statements For Accountants in the UK

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Components of Financial Statements For
Accountants in the UK
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Definition
Financial statement is a summary report that
shows how a company has used the funds or
resources allocated to it by its shareholders
(or owners) or lenders. It also shows companys
current financial position.
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Main Components

• There are five main components of financial
  statement
• Income Statement (Sometimes referred to as profit
  and loss account)
• Balance sheet (Sometimes referred to as statement
  of financial position)
• Statement of cash flows
• Statement of changes in equity (sometimes
  referred to as Statement of stockholders
  equity)
• Notes to the financial statements

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Income Statement
Income statement reports on companys financial
performance over a specified period of time (it
could be one year, one month, 15 weeks or any
other time interval chosen by the
company) Revenues, expenses, gains and losses
are the main components of profit and loss
account. Expenses include direct cost, salaries,
rent, utilities, telephone, advertisement etc.,
while sales include sales, interest revenues etc.
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Balance Sheet
The balance sheet reports on companys assets,
liabilities and stockholders equity at a
specified date (this is the last date of the
accounting period). The 1st section of the
balance sheet reports on companys assets, such
as cash, accounts receivable, inventory, prepaid
expenses. This also includes the fixed assets of
the company such as land and building. The Next
section reports on companys liabilities
(obligations that are due at balance sheet
date). This includes accounts payable, net wages
payable, interest payable etc. The final section
is stockholders' equity that defines the
difference between the assets amount and
liabilities amount.
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Statement of Cash Flows
The cash flows statement represents the change in
cash and cash equivalents of the company during
the specified time. This is divided into three
activities
Operating activities Investing activities Financin
g activities
1. 2. 3.
The first activity (operating) explains how a
companys cash position has changed due to
operations. Investing activities include the
amounts received or spent in transactions
involving long term assets and other
investments. While the financing activities
reports on cash received due to the issuance of
preference shares or long term debt, payments of
dividends or principal payments to retire
long-term liabilities.
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Statement of Stockholders Equity
Statement of Stockholders' Equity reports on the
changes in stockholders or shareholders equity
or interest of the ownership in company from the
beginning of the accounting period to end of the
accounting period.
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Notes to the Financial Statements
The footnotes to the financial statements refer
to additional information that is necessary for
a fair presentation of financial position and
results of operations and to provide information
that is not easily apparent from and not included
in the financial statements themselves.
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