ABSTRACT
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 financial statements. To achieve this appreciation you will need to carefully follow through the chapter’s worked example that illustrates how a set of financial transactions impact on the year-end accounts. Once you have gained an appreciation of the nature of the year-end financial statements, the next chapter will introduce the ‘debit/credit’ double entry record-keeping process that underlies the financial accounting system. Finally, Chapter 4 introduces some more advanced aspects of double entry record-keeping by reviewing year-end adjustments that need to be made to the financial records in order to recognize time-related issues such as asset depreciation.
