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Financial Statements of Companies

5 dot points across 5 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

How is a company's income statement structured from revenue down to profit for the year, and what does each subtotal mean?

Prepare a company income statement and explain the meaning of gross profit, operating profit and profit for the year
A focused answer to the H2 Principles of Accounting outcome on the company income statement. Revenue, cost of sales and gross profit, operating expenses and operating profit, finance costs and tax, and profit for the year.
10 min answer →

How do companies raise long-term finance through shares and debentures, and how is each accounted for?

Distinguish ordinary shares, preference shares and debentures and account for their issue and the returns paid to holders
A focused answer to the H2 Principles of Accounting outcome on shares and debentures. Ordinary and preference shares, debentures as loan capital, issue at a premium, dividends versus interest, and where each appears in the statements.
10 min answer →

How does the statement of changes in equity reconcile the opening and closing equity of a company?

Prepare a statement of changes in equity showing movements in share capital and reserves over the period
A focused answer to the H2 Principles of Accounting outcome on the statement of changes in equity. Opening balances, profit for the year, dividends, share issues and reserve transfers, reconciling to closing equity.
9 min answer →

How is a company's statement of financial position structured, and why must net assets always equal equity?

Prepare a company statement of financial position and explain the classification of assets, liabilities and equity
A focused answer to the H2 Principles of Accounting outcome on the statement of financial position. Non-current and current assets, current and non-current liabilities, the equity section, and why net assets equal total equity.
10 min answer →

What year-end adjustments turn a trial balance into a complete set of financial statements?

Apply year-end adjustments for accruals, prepayments, depreciation and impairment when preparing financial statements
A focused answer to the H2 Principles of Accounting outcome on year-end adjustments. Accruals and prepayments of expenses and income, depreciation, impairment of receivables, and their dual effect on profit and the statement of financial position.
10 min answer →