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Control
Liabilities =
Short-term and Long-term Debt (4)
Capital =
Owner’s Share (2)
6=4+2
Total Accounting Equation
The sum of the revenues increases the
owners’ capital
The sum of the expenses decrease the
owner’s capital
Assets =
Liabilities + Owner’s Capital
+Revenues - Expenses
Example 1:
The TOTO company started working on January 2, 2002. During the course
of the year, it made revenues in the amount of 50.000 € and expenses in
the amount of 43.000 €. At the end of the period, the company paid
dividends to its shareholders in the amount of 1.000 €. The Statement of
Retained Earnings of the company was as follows:
During the course of 2003, the TOTO company made revenues in the
amount of 60.000 € and expenses in the amount of 44.000 €. It paid
dividends which amounted to 1.500 €. The Statement of Retained Earnings
is as follows:
Note: The beginning balance of the retained earnings for 2003 is the same as
the ending balance of retained earnings in 2002.
Financial Statements
Provide information about the company
Are based on accounting records
Pros of the Financial Statements
To have a correct picture for the company and its operations
To use the past experience in order to predict for the future Да
се оцени активноста на претпријатието (вашиот успех)
To evaluate the activities of the company (to avoid mistakes)
To see the warning signs for financial problems
To see the achievements (of the company in comparison to the
others)
To attract investments
To secure loans
Key Financial Statements
Income Statement
Statement of Retained Earnings
Balance Sheet
Cash Flow Statement
Balance Sheet:
Assets = Liabilities + Owner’s Capital
Income Statement:
Revenues – Expenses = Net Profit (Loss)
Income Statement
Sales 392.500
Cost of Goods Sold
Salaries for production workers 110.000
Material costs 150.000
Other direct costs 10.000
Total Cost of Goods Sold 270.000
Gross Income 122.500
Operating Expenses
Sales and marketing expenses 52.000
General and administrative expenses 34.000
Depreciation
Total operating expenses 86.000
Net operating income 36.500
Other revenues (expenses)
Other revenues
Other expenses
Interest expenses
Total other revenues (expenses)
Income Before Taxes
Income Tax
Net Income (Loss) 36.500
Rules for Every Income
Statement
Revenues– Expenses = Income or Loss
8– 3 = 5
Important elements of the income
statement are :
Revenues and
Expenses
Два основни елементи кои ги
содржи Билансо на Успех
Revenues
Sales from the main activity
Revenues from other activities such as:
Sales of assets
Investments
Other
Expenses
Expenses from the main activity
Expenses from other activities
Interest
Expenses from sales of assets
Other expenses
Sales/ Revenues
INVENTORY CASH
Sales Invoices
Salary Documents
Utility Invoices
Block Paragons
Cash Receipt
Bank Report
Balance Sheet
6=4+2
Balance Sheet
6=4+2
Balance Sheet
Long-Term Liabilities
Amounts that the company owes, and
mature for longer than one year.
Current Liabilities
Amounts that the company should pay in
the course of one year
Current Liabilities
Accounts Payable
Amounts that the company should pay to
its suppliers
Documents that Provide Information
for the Balance Sheet
Information for company transactions
Incoming Cash Receipts
Outgoing Cash Receipts
Contracts
Sales/ Purchase Invoices
Bank Reports
Debt Documents
The Principle of Balance
There should always be two parts of
the transaction
Both parts should be equal
Both sides of the Balance Sheet should
be equal
Balance Sheet: Example
Cash
Private capital/ equity
Answer
Company ТТ-AB
BALANCE SHEET
CASH = CASH
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Additional Accounting
Information
www.seebiz.net.mk
www.ujp.gov.mk
www.finance.gov.mk
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