Accounting and Financial Statement Analysis: Key Concepts
Accounting: A Comprehensive Overview
Accounting is a system that allows a company to collect, analyze, classify, calculate, check, and record economic facts to support decision-making.
Audit: Definition and Purpose
An audit is a technique that allows for the auditing of accounts in financial statements. This is done through substantive tests to analyze the safety and performance of the internal control system.
Current and Non-Current Liabilities
This section covers current assets, short-term expenses, revenues, and vocabulary that appears in IAS 1, such as the notes.
FECU
Notes and Accounts Receivable from Related Companies
Notes and accounts receivable from related companies, less interest income, where recovery does not exceed one year.
Recoverable Taxes
Net of VAT tax credit, PPM greater than the provision for income tax or other credits to the LIR (training, sports gifts, credit purchases of fixed assets, including PPM to recover for lost profits absorbed by tax).
Prepaid Expenses
Payments for services to be received by the company, such as leases, insurance, and other services canceled in advance.
Contract Leasing
Short-term nominal maturity of one year. The breakdown must be disclosed in the notes to the financial statements. Less deferred interest to be collected and provisions on leasing contracts. (Current Asset)
Long-Term Leasing Contracts
Face value of leasing contracts whose maturity exceeds one year, net of interest receivable and deferred provisions on leasing contracts proportional.
Technical Highest Value of Fixed Asset Revaluation (MVRTAF)
On the book value of assets RETAS, only for companies that have benefited under the circular of IBS.
Accumulated Depreciation
Accumulated depreciation of fixed assets, including MVRTAF until the closing date of the financial statements.
Investments from Related Companies
If the company cannot afford to have PPM, much tax expenditures may send a letter to the regional director of IBS to pay in installments.
Deferred Tax (Every Stage)
- Short-term: Difference between the tax debtor to pay advance tax and spending PPM for income tax short-term and tax losses that imply a tax benefit. (Current Asset)
- Long-term: Difference between the tax debtor Pagro in a tax year and tax expenditures for income tax. (Other Assets)
Intangible Assets
Intangible assets include patents, franchises, trademarks, concessions, and right keys.
Amortization
Wear of intangible assets.
Other Assets
(Higher value investments) (Depreciation)
Additional EDI Asset Accounts
The account EDI: Doc x charge applies net.
Current Liabilities: Documents Receivable from Related Companies
With related obligations, which come or not from commercial operations, net of unearned interest.
Debtors x Net Sales
Sundry Debtors
Supplies
Estimated expenditures in a period of 1 year.
Gratuity
25% legal, voluntary.
Holidays
Proportional.
Deductions for Short-Term Obligations
Withholding taxes, VAT, second category, includes the obligations to pay as wages, pension contributions.
Income Received in Advance
Income received in advance with effect for the following year.
Obligations with Banks (Portion of Long-Term Debt in the Short-Term)
Portion maturing within one year, long-term credits contracted with banks and institutions, including accrued interest.
Long-Term Liabilities
Minority Interest
Obligation of the consolidated balance sheet of a holding company, the portion of the assets of the subsidiaries that belongs to people other than the parent.
Long-Term Provisions
Estimated costs or expenses accrued to be settled over a one-year term, as in the case of compensation for years of service.
Equity Summary
Paid Capital
Capital actually paid and revalued with IPC.
Reserve Capital
After carving out the capital, it is a part to upgrade. No revaluation.
Surcharge on Sales of Treasury Stock
Highest value obtained on placement shares for payment.
Other Reserves
Capitalization stocks undefined previous amount.
Retained Earnings
Sum of:
- Reservation for future dividends: Formed by the distribution and redistribution of profits to cover future dividends.
- Accumulated earnings: Incorporates all the reserves from profits not described earlier.
- (Accumulated loss): (Debit balance) lost in previous periods not absorbed into the balance sheet date.
- Income or (loss) for the year: Profit or loss for the current period.
- Interim dividends (less): Requirements – lowering the utility.
- Operating Expenses: Start-up costs during the development period, both for the company and related companies.
Income Statement
Export performance: Operating income (a1-a2)
A1. Operating Margin
- Operating income
- Sale of merchandise
- Sale of services – Outsourcing, technical service, training
- (Operation cost)
- (Cost of production)
- (Acquisition cost)
A2. (Selling and administrative expenses)
Non-Operating Income
- Finance income
- Utility companies related to investments
- Other non-operating income
- (Loss of related companies)
- (Amortization of goodwill)
- (Interest expense)
- (Other non-farm)
- Restatement (credit balance)
- Exchange differences
Income Before Income Taxes and Extraordinary Items
Income Tax
(May be (-) 0 (+))
Special Items
Value of income and expenditure that is unusual or infrequent in occurrence, fines, accounts not forecast, unusual losses.
Income (Loss) Before Minority Interest
Consolidated income prior to the proportion of the result of subsidiaries.
Minority Interest
Income (Loss) Liquid
Amortization of investments
Income (Loss) for the Year
This is the result of all the above.
The objective of IAS is to establish the basis for financial reporting for decision-making.
Notes: Additional information presented in the financial statements providing information on the issues raised.
Reclassification adjustments: These are amounts reclassified to the result in the current period that were recognized in other comprehensive results in the current period or prior periods.
Financial instruments: All puttable financial assets are classified as equity.
Financial Statements
Purpose of Financial Statements
Financial statements are a structured representation of the financial situation. They provide information on the financial performance and cash flows of an entity. You can see the results of the efforts of managers.
Frequency of Information
An entity shall disclose comparative information on the previous year at least once a year.
Going Concern Hypothesis
An entity prepares financial statements under the assumption that the company will continue to operate unless it decides to cease operations.
Materiality and Grouping of Data
An entity shall present separately each class of similar items that have relative importance. It should also separate items of dissimilar nature or function.
Identification of Financial Statements
An entity should clearly identify financial statements and distinguish them from other information, being immersed, accurate, and complete.
A entity should clearly identify each financial statement and the notes to:
- The name for entity identification.
- Whether the financial statements belong to a group or individually.
- The currency in the submission if dollar, peso, euro, etc. The rounding. In Chile, there are no decimal places; in other countries, e.g., cents.
Current Assets
Current assets will be considered as such when they meet the following requirements:
- Sale, use, or performance within a year.
- Held for trading purposes.
- Expect to move the asset within twelve months.
- Must be cash or an equivalent to this, such as checks, promissory notes, etc.
Non-Current Assets
Non-current assets are all those tangible, intangible, and financial assets that are long-term in nature (over 1 year).
Current Liabilities
The same conditions as current assets apply.
Statement of Overall Result
The choice will depend on both historical factors as industry or the turn where the body frame, and the very nature of it. (Classification of cats)
Cash Flow Statements
Information on cash flows provides users of financial statements with a basis for assessing the ability of the entity to generate cash and equivalents.
Causes of Uncertainty in Estimates
An entity shall disclose information on future scenarios and other causes of uncertainty in the estimated year-end, based on economic indicators.
Capital
An entity should disclose information that enables users to evaluate their objectives, policies, and processes used to manage the entity’s capital.
Other Disclosures
An entity shall disclose in the notes:
- Dividends proposed.
- The cumulative amount of any dividend which has not been recognized.
An entity should disclose the following if it has not been disclosed elsewhere in the information published:
- The domicile and legal form of the entity’s country of incorporation and the address.