Chapter 4

• Financial statements provide financial information about an entity’s assets, liabilities, equity, income and expenses useful to users of financial statements.
• statement of financial position: asset, liabilities, and equity
• statement of cash flows: expense and income from operating, financing, and investing activities
• income statement: income and expenses
• statement of changes in equity: contributions and distribution
• notes to financial statements: disclosures required by AS
• Consolidated financial statements: prepared when the reporting entity comprises both parent and its subsidiaries
• Unconsolidated financial statements: reporting entity is the parent alone
• Combined financial statements: reporting entity comprises two or more entities that are not linked by a parent and subsidiary relationship
• reporting entity can be a single entity or a portion of an entity, or can comprise more than one entity
• financial position at the end of the reporting period
• financial performance during the period
• accounting assumptions serve as the foundation or bedrock of accounting
• going concern assumption: the business will continue to operate for the foreseeable future
• accounting entity is the specific business organization (separate entity)
• time period: users of financial information need timely information for making an economic decision
• monetary unit: stability of peso (1) unit of measure