FINANCIAL STATEMENTS

Part 13

Lesson Objectives

To be able to identify financial Statements.

To be able to describe the purpose of financial statements.

How many can you think of?

Activity 1

Using the following words, please complete the blank sheets you have been given.

You need to match the correct word with its definition!

Statements for fixed assets

Customers’ Accounts

Bills

Suppliers’ Accounts

Loan Statements

Bank statements

Financial Statements

Customers’ Accounts – what we have sold to them and their payments to us.

Suppliers’ Accounts – Our purchases from and payments to our suppliers.

Bills e.g. electric

Statements for fixed assets – e.g. for a van, what has been paid and what is now owed.

Loan Statements – Showing what we have borrowed, paid off and now owe.

Bank statements – Showing all the money we have paid in and taken out of the bank as well as interest we may have been charged.

Activity 2

In pairs decide why a business might keep each of the different types of financial statements.

Why are they important to a business?

Measuring Success with Financial Statements

At the end of the year, a business will draw up two specific financial Statements to keep track of how successful the business’ operations are.

An Income Statement (Profit & Loss account)• Showing gross and net profit• Can be used to see if the business is improving or not.

A Statement of financial Position (Balance Sheet)• Shows everything the business owns (the assets) and

everything it owes (the liabilities.)

Activity 3

Activity 4

Financial Statements Required By Law

The law does not say businesses have to keep the general financial statements we looked at earlier.

If you don’t draw up an income statement you may end up paying too much tax.

If a business is a private or public limited company, the law says it MUST draw up the income statement and statement of financial position and send them to the Registrar of Companies.

Failure to do so, could result in????