Financial Statements (Without Adjustment) Class 11 Notes Accountancy Chapter 8 - CBSE

Chapter : 8

What Are Financial Statements (Without Adjustment) ?

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A financial statement is a statement which presents financial profit data and the financial status of a company. It acts as a source of financial information that caters to the varied information requirements of
users. It is made to represent a fair and true value of the company.
Financial statements deal with only quantitative aspects. They ignore price level changes because of the historical cost concept. Financial statements suffer from the limitation of not being free from personal bias. One of the limitations of financial statements is personal biases. One of the main objectives of financial statements is to compare with other firms.
Stakeholders are those involved with a firm, such as investors, shareholders, board of directors, and employees. Investors, creditors, and lenders don't have any right to control, so they assess the company's financial statements before investing in that particular company to see the safety of their amount.
Capital expenditure is non-recurring by nature.
The expenditure benefit extends to one accounting period, termed revenue expenditure.
The expenditure is revenue, but the heavy amount spent and benefits are likely to be derived over several years, called deferred revenue expenditure.
An example of a capital receipt can be the sale of a fixed asset like old machinery.
Cost of goods sold (COGS) = Opening Stock + Purchases + Direct Expenses – Closing Stock.
A trading account is a financial statement showing the result of buying and selling goods and services for an
accounting year.
A profit and loss statement is also known as the statement of income. The gross loss or profit is carried forward to the profit and loss account. It is also called the corporation's income statement, as it reveals the loss and profit earned by the corporation during an accounting year.
Trading and P/L account are made with the help of the trial balance by transferring the amount of revenues
and expenses. Gross Profit by preparing the trading account. Operating Profit by deducting the operating expenses from gross profit. Net Profit after deducing the non-operating expenses from operating profit and adding the non-operating income.
A balance sheet is arranged for a particular date, not a particular accounting period. A balance sheet helps
in assessing the financial position of a firm's assets and liabilities. A statement prepared to determine the assets and values of a business on a specific date is called a Balance Sheet. Debit signifies the assets, while credits represent the liabilities. It depends on other statements, i.e., trading and Profit and Loss accounts. It reflects the financial position of a company. It is made at the end of an accounting period. The balance of both sides should match.