Nhoeb Sokla Presentation Slide 2010 on the topic: What is Financial Stetement.

1. I. WHAT IS FINANCIAL
STATEMENT?
Kemarak University
Financial Statements are record that provides an indication of an
individual’s, organization’s, or business’s financial status. There are four
basic types of financial statements: balance sheets, income
statements, cash-flow statements, and statements of retained
earnings. Typically, financial statements are used in relation to business
endeavors.
The objective of financial statements is to provide information about
the financial position, performance and changes in financial position of an
enterprise that is useful to a wide range of users in making economic
decisions. Financial statements should be understandable, relevant,
reliable and comparable. Reported assets, liabilities, equity, income and
expenses are directly related to an organization's financial position.
Subject: Corporate Finance
By Student: Nhoeb Sokla

2. II. Definition of each Statements
Kemarak University
An income statement is a type of summary flow report that lists and
categorizes the various revenues and expenses that result from operations
during a given period - a year, a quarter or a month. The difference between
revenues and expenses represents a company's net income or net loss. The
amounts shown in the income statement are the amounts recorded for the
given period - a year, a quarter or a month. The next period’s income statement
will start over with all amounts reset to zero. While the balance sheet shows
accumulated balances since inception, the income statement only shows the
amounts earned or expensed during the period in question.
1. Income Statement
Subject: Corporate FinanceBy Student: Nhoeb Sokla

3. 2. Statement of Retained Earnings
Kemarak University
The statement of retained earnings shows the amount of accumulated
earnings that have been retained within the company since its inception. At the
end of each fiscal year-end, the amount of net income or loss is added to the
opening amount of retained earnings to arrive at the closing retained earnings.
Retained earnings can be decreased by such items as dividends paid to
shareholders. On the sample financial statements shown below, the statement
of retained earnings is combined with the income statement presentation.
Subject: Corporate FinanceBy Student: Nhoeb Sokla

4. 3.Balance Sheet
Kemarak University
The balance sheet is based on the equation: assets = liabilities + owners' equity.
It indicates everything the company owns (assets), everything the company
owes to creditors (liabilities) and the value of the ownership stake in the
company (shareholders' equity, or capital). The balance sheet date is the ending
date of the period or year, and is a continuation of the amounts recorded since
the inception of the company or organization. The balance sheet is a "snapshot"
of the financial position of the company at the balance sheet date and shows the
accumulated balance of the accounts.
Assets and liabilities are separated between current and long-term, where
current items are those items, which will be realized or paid, within one year of
the balance sheet date. Typical current assets are cash, prepaid expenses,
accounts receivable and inventory.
Subject: Corporate FinanceBy Student: Nhoeb Sokla

5. 4. Statement of Cash Flow
Kemarak University
The statement of cash flow provides a look at the movement of cash
in and out of a company. These financial statements include
information from operating, investing, and financing activities. The
cash-flow statement can be important in determining whether or not a
company has enough cash to pay its bills, handle expenses, and acquire
assets. At the bottom of a cash-flow statement, the net cash increase or
decrease can be found.
Subject: Corporate FinanceBy Student: Nhoeb Sokla

6. III. Example of Financial Statements
Kemarak University
Larean Fashion Company
Income Statement
For the year ended December 31, 2009
Net Sales
Gross Sale…………………………………………………………………………………$500,000
Less: Sale Return &
Allowances………………………………………………………………...……............$3,000
Net Sales…………………………………………………………………………………… $497,000
Cost of Goods Sold
Merchandise Inventory, Jan 01,
2009……………………..................…………………………….. $142,000
Purchases…………………………………………………............. $250,420
Less: Purchase Returns………………………………………..... $7,500
Net Purchase………………………………………………………… $242,920
Add: Transportation-in………………………………………………………………… $5,000
Net Cost of purchase…………………………………………………………………….. $247,920
1.Income Statement
Subject: Corporate FinanceBy Student: Nhoeb Sokla

7. Kemarak University
Cost of goods available for sale…………………………………… $389,920
Less: Merchandise inventory, Dec 31, 2009………….... $190,000
Cost of Goods
Sold……………………………………………………………………………..$199,920
Gross Margin…..………………………………………………………………$297,080
Operating Expenses
Selling Expenses:
Sale salaries expense…………………………………………… $71,200
Advertising expense …………………………………………… $40,000
Depreciation expense, store equipment …………………$5,000
Supplies expense ……………………………………………….. $2,000
Total selling expenses……………………………………………………. $117,200
Administrative Expenses:
Office salaries expense ………………………………………… $40,900
Office supplies expense …………………………………………$9,000
Insurance expense ……………………………………………... $2,000
Utilities expense ………………………………………………….. $3,000
Rent expense ……………………………………………………… $30,000
Total administrative expenses…………………………………………. $124,900
Subject: Corporate FinanceBy Student: Nhoeb Sokla

8. Kemarak University
Total operation expenses…………………………………………………. $242,100
Net Income from operation ………………………………………… $54,980
Non Operating Revenue & Expense
Interest revenue………………………………………………………………… $500
Net Income …………………………………………………. ………………… $55,480
2. Statement of Retain Earning
Larean Company
Statement of retain earning
For the year ended December 31, 2009
Larean Capital, Jan 01, 2009……………………………………………….. $165,000
Add: Net Income for the year 2009……………………………………… $54,480
Larean Capital, Dec 31, 2009……………………………………………….. $219,480
Subject: Corporate FinanceBy Student: Nhoeb Sokla

9. 3. Balance Sheet
Kemarak University
Larean Company
Balance Sheet
December 31, 2009
Assets:
Current Assets
Cash………………………………………………………………… $35,320
Note receivable………………………………………………… $30,000
Merchandise Inventory Dec 31,………………………… $190,000
Prepaid Insurance……………………………………………. $150
Total Current Assets………………………………………….$255,470
Fixed Assets
Land ………………………………………………………………... $20,000
Acc.Dep,Land…………………………………………………… $9,000
Total Fixed Assets……………………………………………… $12,000
Total Assets………………………………………………………… $267,470
Subject: Corporate FinanceBy Student: Nhoeb Sokla

10. Kemarak University
Liabilities & Owner’s Equity:
Liabilities
Current Liabilities
Accountant payable ………………………….......…………………. $47,990
Owner’s Equity
Larean, Capital………………………………………………………….$219,480
Total Liabilities & Owner’s Equity……………………………………...$267,470
4. Statement of Cash Flow
Larean Company
Statement of Cash Flow
For the year ended December 31, 2009
Cash flow from operating activities
Receipts:
Collection from customers………………………………. $500,000
Interest receive on note receivable…………………… $3,500
Total cash receipt……………………………………………………………..$503,500
Subject: Corporate FinanceBy Student: Nhoeb Sokla

11. Kemarak University
Payment:
To supplier………………………………………………….. $242,920
To employees………………………………………………..$112,100
For income tax….......................................................... $554.8
Total cash payment……………………………………………… $335,574.8
Net cash flow from operating activities………………………………………………$167,925.2
Cash flow from investing activities
Acquisition of plant assets……………………………… $80,000
Proceeds from sale of plant assets…………………….$7,000
Net cash flow from investing activities ………………………………………………….$73,000
Cash flow from financing activities
Proceeds from issuance of common stock…………..$190,000
Payment of dividends……………………………………….$150,000
Net cash flow from financing activities………………………………………………….$40,000
Net decrease/increase in cash…………………………………………. $54,925.2
Cash balance, Jan 01, 2009…………………………………..$165,000
Cash balance, Dec 31, 2009…………………………………………………………… $219,925.2
Subject: Corporate FinanceBy Student: Nhoeb Sokla

12. IV. Definition of each account
Kemarak University
Asset: are things of value owned by a business. They are called the resources of
the business.
Liabilities: are the debts owned by a business. Typically, a business must pay
its debts by certain date.
Cash: includes money deposits in banks or pay.
Note receivable: are the debts, which the customer haven’t paid yet and have
been, sighing as a note with a maturity date.
Prepaid Insurance: is the paid of insurance in a company for advance and
haven’t been realized yet.
Land: is ground the company uses to carry on its business or a company
invested.
Depreciation expense: is the amount of asset cost assigned as an expense to
a particular time period.
Account payable: are amounts owed to suppliers for goods or services
purchased on credit.
Owner’ equity: is the share of the business that the proprietor (owner) owns
outright.
Subject: Corporate FinanceBy Student: Nhoeb Sokla

13. Kemarak University
Gross sales: are the sales of goods in a company during a period time.
Sale return: are the goods, which the customers refer it back because of its
quality, etc.
Net sales: are the amount of cash received after gross sales minus sale return
and allowance.
Cost of goods sold: are the costs of goods which we sold to the customers.
Inventory: are the amounts of goods, which company have in stock or
balance.
Purchases: are cost of goods buy from supplier.
Purchase return: are the amounts of goods, which refer to the supplier.
Gross margin: are the profits of net sales minus cost of goods sold.
Sale salaries expense: refer to the cost of salaries for employees, who work
at sale place.
Advertising expense: are the amounts of spend of advertising on newspaper,
television, etc.
Supplies expense: cost of use supplies during a period time.
Office salaries expense: refer to the cost of salaries for employees, who
work for administration.
Subject: Corporate FinanceBy Student: Nhoeb Sokla

14. Kemarak University
Insurance expense: the cost of spending for using insurance for a period of
time.
Utilities expense: the cost of using the electricity and water per period.
Rent expense: cost of rent a building or land for carry on a business.
Net income: a profit of a company, which happened during a period of time.
Operating activities: are the earning related activities if a company.
Investing activities: ate means of acquiring and disposing of non cash assets.
Financing activities: are means if contributing, withdrawing, and servicing
funds to support business activities
Subject: Corporate FinanceBy Student: Nhoeb Sokla