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C6 Lecture Notes

The document discusses key financial statements used to report an entity's financial performance and position. It defines the income statement as the formal statement showing financial results for a period. The income statement has components of income from various sources and expenses in different categories. It can be presented in functional or natural formats. The statement of comprehensive income reports total profit/loss plus other comprehensive income items. Other statements discussed include the statement of retained earnings, statement of changes in equity, and statement of cash flows.

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125 views2 pages

C6 Lecture Notes

The document discusses key financial statements used to report an entity's financial performance and position. It defines the income statement as the formal statement showing financial results for a period. The income statement has components of income from various sources and expenses in different categories. It can be presented in functional or natural formats. The statement of comprehensive income reports total profit/loss plus other comprehensive income items. Other statements discussed include the statement of retained earnings, statement of changes in equity, and statement of cash flows.

Uploaded by

Jonathan Navallo
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CHAPTER 6:

STATEMENT OF
COMPREHENSIVE INCOME
INCOME STATEMENT
Change in equity during a period resulting from
transactions and other events except Additional Formal statement showing the financial
Investments and Withdrawals) performance/results of operation of an entity
for a given period of time.
a) Components of Profit and Loss
b) Components of other Comprehensive SOURCES OF INCOME
Income
a) Sales of Merchandise
b) Rendering of Services
PROFIT OR LOSS c) Use of Entity Resources (Interest, rent,
royalty etc.)
 total of income (-) expenses excluding d) Disposal of Resources other than
other comprehensive income products
 “bottom line” in the traditional income
statement
COMPONENTS OF EXPENSES
a) Cost of Goods Sold/Cost of Sales
b) Distribution Cost/Selling Expenses
OTHER COMPREHENSIVE c) Administrative Expenses
INCOME (OCI) d) Other Expenses
e) Income Tax Expense
Items of income and expenses that are not
recognized in profit or loss a required or
permitted by the PFRS
FORMS OF INCOME STATEMENT
1. OCI that will be reclassified subsequently to
profit/loss: 1. FUNCTIONAL PRESENTATION (COST OF
SALES METHOD)
a) Gain/loss from translating financial
statements of a foreign operation  Classifies expenses according to function
b) Unrealized gain/loss from derivative  Disclose additional info on the nature of
contracts designated as cash flow hedge expenses

2. OCI that will not be reclassified subsequently 2. NATURAL PRESENTATION (NATURE OF


to profit/loss: EXPENSE METHOD)

a) Unrealized gain or loss on equity  Combined accdng to nature & presented


investment measured at fair value as one item
b) Revaluation surplus during the year  No longer classified as cost of sales,
c) “Remeasurements” of a defined benefit distribution cost, etc.
plan, including actuarial gain/loss
d) Change in fair value attributable to credit
risk of a financial liability
STATEMENT OF RETAINED
EARNINGS
PRESENTATION OF
Changes affecting directly the retained
COMPREHENSIVE INCOME earnings of an entity
1. Two Statements a) Profit or Loss for the period
a) Income Statement b) Prior period errors
b) Statement of Comprehensive Income c) Dividends declared and paid to
shareholders
2. Single Statement – combined statement of d) Effect of change in accounting policy
components of profit or loss plus/minus the e) Appropriation of retained earnings
components of OCI
STATEMENT OF CHANGES IN
EQUITY
Movements in the elements/components of the
shareholder’s equity; *Statement of Retained
Earnings is no longer required but a part in the
Statement of Changes in Equity

STATEMENT OF CASH FLOWS


Summarizes the operating, investing and
financing activities of the entity; *Provides
information about cash receipts and cash
payments of an entity during a period

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