ABSTRACT
After studying this chapter, you should have developed an appreciation of:
1. How there is a double financial implication arising from every financial
transaction undertaken by an organisation
2. The nature and format of the balance sheet
3. The nature and format of the profit and loss statement
4. How profit computed in the profit and loss statement flows into the
owner’s equity section of the balance sheet via the statement of owner’s
equity
This is the first of the three chapters concerned with financial accounting.
Financial accounting concerns the preparation of financial reports that are
made available to external users such as shareholders. This chapter provides
an overview of the main financial accounting statements that appear in
annual reports prepared by publicly listed companies (i.e., companies with
shares listed on a stock exchange). Although this is not a long chapter, the
material presented is fairly concentrated. A considered review of this material
will provide you with a good basic appreciation of the nature of the year-end
