COMPONENTS OF FINANCIAL STATEMENTS

A full set of financial statements would include the following:


1. A statement of financial position. (balance sheet)
2. A statement of comprehensive income.( Profit & Loss account)
3. A statement of changes in equity.
4. A statement of cash flows.
5. Notes to the financial statements.

What is Accounting systems (Book-keeping )

Business entities operate a system to record business transactions in accounting records. This system is called a book-keeping system. All large businesses (and many small ones) have a book-keeping system for recording the financial details of their business transactions on a regular basis. The bookkeeping records of a business are often referred to as the accounts of the business. The content of financial statements might vary depending on whether a business is a sole trader, partnership of company. However, the basic process used to record transactions is similar for all types of entity. The techniques used is called double entry bookkeeping.

What is the difference between Capital & Revenue expenditure

Capital expenditure is expenditure made to acquire or improve long term assets that are used by the business. Examples include the following:

1. Purchase of property,
2. Plant and equipment,
3. Office equipment;
4. Motor vehicles; 
5. Installation costs associated with new equipment; 
6. Improvements and additions to existing non-current assets (for example, building extensions, installation of air-conditioning etc.)
7. Fees paid to raise long term finance are also deemed to be capital in nature.
8. 
   
   To pay fees associated with raising long term finance 

Revenue expenditure is expenditure on day-to-day operating expenses. Examples include:

1.Purchase of goods meant for resale in the normal course of business.
2.Purchase of raw materials and components used to manufacture goods for resale in the normal     course of business.
3.Expenditures made to meet the day to day running costs of a business (for example, rent, energy, 4.wages etc.)
5.Expenditures made to repair non-current assets.
6.Expenditures made to distribute goods to customers.

7.Costs of administering a business (for example, accounting services, license fees etc.)
8.Revenue expenditure is reported as expenditure in the statement of comprehensive income.