Financial statements


Good day Class. Today, we will do financial statements.

Introduction to Financial statements.

The main object of any business is to provide financial information on the results of the economic activities of a business.

Please pay attention! Watch the video.

This video is explaining the three financial statements. Financial Statements consists of an Income statement and a Balance sheet.

Income statement = financial results of a business or income and expenses during a specific period.

Balance sheet = statement in which the financial position of a business for a certain period is shown.

The video explain the concept is an income , expense, asset, liability, owner's equity.

The following people/stakeholders will be interested in the financial statements of a business:

  • SARS
  • Employees
  • Union
  • Creditos
  • Financial institutions

1. Complete the following table. Indicate whether the concept is an income. expenses, asset, liability and owner's equity

Concept Answer



8 Marks

2.Adjustments to be expected when preparing the financial statements

a. Income received in advance adjustment.

Rent for R65 000 was received for 13 months.10 marks


Prepaid expense adjustment.

Paid R16 000 insurance for 14 months. 10 marks


Accrued expense adjustment.

Account for repair R500 is still outstanding.

Pre- adjustments

Repairs R4 000. 10 marks


Step 1

Complete the table


Equipment Asset

Example, Adjustment: Tenant R11 000  paid the rent for 11 months.

Step 2

Analysis of information

Rent a month is R1 000. (R11 000+R1 000)= R12 000

Step 3

Accounting equation

Increase Asset: Increase Owner's equity

Step 4

Recording the adjustments to the income statement

Other operating income: Rent income R12 000

Step 5

Recording to the balance sheet.

Trade and other receivables: Accrued income R1 000



Concept Answer
Vehicle Asset
Stationery Expense
Capital Owner's equity
Loan Liability

8 Marks


Concept  Step2 Step3 Step4 Step5
a. Rent income

One month in advance

R65 000/13= R500

Increase liabilities: decrease owner's equity

Other operating income

Rent income

b.  Insurance R16 800-R2 400=R14 400 Increase asset: increase owner's equity

Other operating expenses


Prepaid expense
c. Repairs R4 000+R 500= R4 500 decrease owner's equity: increase liability

Operating expenses


Accrued expense

30 Marks


The are tow financial statement of a business (grade10-11)

We covered : Income statement, balance sheet, analysis the information and accounting equation.

Income statement which reflect the business's operating activities during the financial year. (Income and expenses)

Balance sheet which set out the business's financial position at the end of the financial year. ( Asset. Owner's equity and liabilities).

We recorded the adjustments to the financial statement.

List of Links for the adjustments

Please keep on practicing. This task will be examined.


Thank you for participating to the task. If you have any query please write a note from your work. I am available after school or just send a whatsapp text.

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All information is available for reuse.

For more material to practice. Please watch the video.