A full set of the financial statements includes the following:
Statement of Comprehensive Income
Statement of Changes in Owners Equity
Statement of Cash Flows
Notes to the Financial Statements
The notes to the financial statements is a required part of full set of the financial statements. These notes are prepared by the organization’s management. These notes are prepared to explain information and data not found on the face of the financial statements. It will also help the users fully understand what the financial statements are trying to convey. The notes must include but not limited to the following:
- The accounting principles and standards adopted by the organization for accounting the economic transactions the latter has entered into within the period covered by the financial statements
- Major components of the financial accounts presented in the face of the financial statements
- The methods of accounting employed on various financial accounts as well as changes on these methods
- The organizational policies set for various economic transactions. These policies include the major significant policies being followed
- Major changes in the financial accounts presented in the face of the financial statements (changes in the equity accounts)
- Summary of contingencies and possible litigation
- Major contractual obligations
- Events after the balance sheet date that may have an impact on the users
- Related party transactions. These are crucial especially for large organizations with many affiliates and subsidiaries.
- This is just an overview of the topic. A more detailed article will be published covering this are of the exam.
Read more CPA review notes in Bookeepedia.