2
Types of financial statements and their purposes
In financial accounting, a corporation prepares a “financial statement” to
report its financial status to interested parties, including shareholders,
banks, vendors, and public institutions.
The following are examples of financial statements.
ABC trading company
XYZ bank
Reference
B/S
Abbreviation for “Balance sheet.”
Assets
(1)Balance sheet
A “balance sheet” shows a corporation’s financial status at a certain point
in time. On a balance sheet, debits or “assets” appear on the left, and credits or “liabilities” appear on the right. The process of checking whether
the final totals of assets and liabilities agree is called a “balance check.” A
balance sheet has the following tabular format.
Titles
Amount
(Assets)
Cash:
Titles
Amount
(Liabilities)
1,000,000 yen
Accounts receivable:
50,000 yen
Inventory:
60,000 yen
Debt:
70,000 yen
Accounts payable:
40,000 yen
Total liabilities:
110,000 yen
(Owner’s Equity)
Total assets:
1,110,000 yen
“Assets” are items such as cash or
property. They include buildings such
as shops and offices, automobiles,
products, and other “debits” that can be
cashed in.
Major accounting titles of asset
●Current assets
Corporate and legal affairs
Reference
Financial
statement
Chapter 1
Checks state of business operations
Example: Cash, securities, accounts
receivables, etc.
●Fixed assets
• Tangible assets
Example: Land, buildings, fixtures,
etc.
• Intangible assets
Example: Patent rights, leasehold
rights, goodwill
●Deferred assets
Capital stock:
800,000 yen
Retained earnings:
200,000 yen
Total owner’s equity:
1,000,000 yen
Total liabilities &
owner’s equity:
1,110,000 yen
A balance sheet treats everything, including products as if transacted in
terms of monetary value. Even if a rental agreement is pending, it is not
subject to recording since no money has changed hands at this point.
Example: Franchise fees, development costs, corporate
bond issuance fees, etc.
Reference
Liabilities
“Liabilities” are items such as debt.
They refer to any “credits” that need to
be paid.
Major accounting titles of liability
●Current liabilities
Example: Notes payable, accounts
payable, short-term debt,
etc.
●Fixed liabilities
Example: Corporate bonds, long-term
debt, accrued employee retirement benefit, etc.
Reference
Net assets
“Net assets” is total assets less total liabilities.
40