Introduction
Good day Class. Today, we will do financial statements.
Introduction to Financial statements.
The main object of any business is to provide financial information on the results of the economic activities of a business.
Please pay attention! Watch the video.
This video is explaining the three financial statements. Financial Statements consists of an Income statement and a Balance sheet.
Income statement = financial results of a business or income and expenses during a specific period.
Balance sheet = statement in which the financial position of a business for a certain period is shown.
The video explain the concept is an income , expense, asset, liability, owner's equity.
The following people/stakeholders will be interested in the financial statements of a business:
- SARS
- Employees
- Union
- Creditos
- Financial institutions
Task
1. Complete the following table. Indicate whether the concept is an income. expenses, asset, liability and owner's equity
| Concept | Answer |
|
Vehicle |
|
| Stationery | |
| Capital | |
| Loan |
8 Marks
2.Adjustments to be expected when preparing the financial statements
a. Income received in advance adjustment.
Rent for R65 000 was received for 13 months.10 marks
b.
Prepaid expense adjustment.
Paid R16 000 insurance for 14 months. 10 marks
c.
Accrued expense adjustment.
Account for repair R500 is still outstanding.
Pre- adjustments
Repairs R4 000. 10 marks
Process
Step 1
Complete the table
Example:
| Equipment | Asset |
Example, Adjustment: Tenant R11 000 paid the rent for 11 months.
Step 2
Analysis of information
Rent a month is R1 000. (R11 000+R1 000)= R12 000
Step 3
Accounting equation
Increase Asset: Increase Owner's equity
Step 4
Recording the adjustments to the income statement
Other operating income: Rent income R12 000
Step 5
Recording to the balance sheet.
Trade and other receivables: Accrued income R1 000
Evaluation
1.
| Concept | Answer |
| Vehicle | Asset |
| Stationery | Expense |
| Capital | Owner's equity |
| Loan | Liability |
8 Marks
2.
| Concept | Step2 | Step3 | Step4 | Step5 |
| a. Rent income |
One month in advance R65 000/13= R500 |
Increase liabilities: decrease owner's equity |
Other operating income Rent income |
Liabilities |
| b. Insurance | R16 800-R2 400=R14 400 | Increase asset: increase owner's equity |
Other operating expenses Insurance |
Prepaid expense |
| c. Repairs | R4 000+R 500= R4 500 | decrease owner's equity: increase liability |
Operating expenses Repairs |
Accrued expense |
30 Marks
Conclusion
The are tow financial statement of a business (grade10-11)
We covered : Income statement, balance sheet, analysis the information and accounting equation.
Income statement which reflect the business's operating activities during the financial year. (Income and expenses)
Balance sheet which set out the business's financial position at the end of the financial year. ( Asset. Owner's equity and liabilities).
We recorded the adjustments to the financial statement.
List of Links for the adjustments
Please keep on practicing. This task will be examined.
Credits
Thank you for participating to the task. If you have any query please write a note from your work. I am available after school or just send a whatsapp text.
Teacher Page
All information is available for reuse.
For more material to practice. Please watch the video.