Financial statements with elements of financial statement

Q. What are the four types of Financial Statements/Components?
Financial Statements: This section introduces us to how financial statements are prepared from the analysis of business transactions. The four financial statements and their purposes are:
1. Income statement — describes a company’s revenues and expenses along with the resulting net income or loss over a period of time due to earnings activities.

2. Statement of owner’s equity— explains changes in equity from net income (or loss) and from any owner investments and withdrawals over a period of time.

3. Balance sheet — describes a company’s financial position (types and amounts of assets, liabilities, and equity) at a point in time.

4. Statement of cash flows — identifies cash inflows (receipts) and cash outflows (payments) over a period of time.

 
Q19: What are the elements of financial statements?
Elements of Financial Statements: The elements which are directly related to the measurement of financial position are assets, liabilities and equity. The elements which are directly related to the measurement of profit are income and expenses.

Asset: An asset is a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise.

Liability: A liability is a present obligation of the enterprise arising from past events the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. There is a distinction between a present obligation and future commitment. A decision by the management of an enterprise to acquire assets in future does not of itself give the rise to a present obligation.

 
Equity: In a corporate enterprise equity is classified in the Balance Sheet as Share Capital and Reserve and Surplus. Normally Equity is shown at its paid up value.

Income and Expenses: Income is increase in economic benefits during the accounting period in the form of inflows or enhancement of assets or decrease of liability that result in increase of equity. Whereas expenses are decreases in economic benefits during the accounting period in the form of' outflows or depletion of assets or increases in liabilities that result in decrease in equity other than those relating to distribution to equity participants.