Accounting and Financial Statements

Preparation and Presentation of Financial Statements referring to the Financial Accounting Standards established by the Financial Accounting Standards Board-IAI. Currently, an outline of Financial Accounting Standards SFAS contains 59 along Framework for the Preparation and Presentation of Financial Statements underlying and 4 IPSAK. Financial Accounting Standards established by the IAI is an adaptation of the International Accounting Standards.

Adoption of International Accounting Standards into the Financial Accounting Standards Board Financial Accounting Standards-Institute of Accountants Indonesia as one of harmonization and dynamics of international financial accounting practices in an effort to meet the challenges of globalization.


Accounting is often called the “language of business” because accounting is an information system that provides reports for the parties concerned (stakeholders) about the economic activities and the condition of a company. Accounting can be defined as the process of recording, measurement and delivery of economic information that can be used as the basis for decision-making or policy. Information is presented in the form of a report accounting or better known as financial statements.

The purpose of financial reporting is to provide information about the financial position, performance and cash flows of companies that benefit the majority of the users report in order to make economic decisions and demonstrate accountability (stewardship) management over the use of the resources entrusted to them.

There are four main types of financial statements, namely the balance sheet (statement of changes in financial position), income statement, statement of changes in equity and cash flow statement. Financial reporting (financial reporting) includes not only the financial statements, but also other media that can be used to communicate information either directly or indirectly related to the accounting process. For example, the annual report to shareholders contains not only the primary financial statements, as noted above, but also other information, such as financial ratios that are considered important, an overview of the amount or the balance of certain accounts.

Parties associated with the financial statements is IAI, Bapepam, JSX, the Tax Office and the Office of Public Accountant (Auditor) and other financial statement users. In a different way each party has the same goal, namely to produce quality financial statements (trustworthy and reliable, relevant, and timely).

Conceptual Framework for Accounting and Accounting Profession

1. In preparing and presenting its financial statements, management has the discretion to choose alternative accounting principles or methods that are intended to reflect accurately the economic condition of the company in relation to business operations and transactions. For that, we need a reference in accounting practices in preparing and presenting financial statements. The basic framework of accounting and financial reporting set as the purpose to define in broad terms about the purpose, terms and concepts related to accounting practices, which in turn is necessary to define the scope and limits of accounting and financial statements.
2. The framework contains the following items. (1) The purpose of the financial statements. (2) The basic assumption. (3) The qualitative characteristics of financial statements. (4) The element of the financial statements. (5) Recognition and measurement of financial statement items. (6) The concept of capital and capital maintenance.

3. The basic assumption in the preparation and presentation of financial statements are the accrual basis of accounting and business continuity. There are four characteristics of the financial statements, which is understandable, relevant, reliability, and can be compared. The elements of financial statements include the assets, liabilities, equity, revenues, expenses, gains, losses, payments to the owners, distributions to owners.

4. In general, there are at least three parties a career in accounting, related to accounting and financial reporting, the management accountant (accounting firms), public accountants and users of the report.

Income Statement and Statement of Changes in Equity

1. The financial statements of a company consists of the following.
* Income statement.
* Statement of Changes in Equity.
* Balance Sheet.
* Cash flow statement.
2. The financial statements are the result of recording, classifying, summarizing the data records, the application of the principles and practices of accounting and usage of personal experience constituent. Therefore, it’s no surprise that the financial statements contain limitations as follows:
* Characteristically Historical.
* General Characteristically.
* Use of estimates and personal considerations.
* Contains information which is material only.
* Characteristically conservative.
* Emphasis on economic significance, not the legal form.
Using technical terms of accounting.
* Contains various alternative methods of accounting.
* Unable to present qualitative information that are non-financial.
3. Presentation of the income statement can be made in two forms as follows.
* Forms multiple step (step increments).
* Form a single step (single step).
Incremental Step 4. In the form of an income statement contains the following information.
* Sales.
* Cost of Goods Sold or Expenses Provision of Services.
* Gross profit.
* Operating expenses.
* Operating profit.
* Income and Other Expenses.
* Income Before Extraordinary Items.
* Extraordinary Items.
* Cumulative Effect of Changes in Accounting Principles.
* Earnings Before Income Tax.
* Income tax.
* Net profit.
5. In the income statement forms a single step only known one type of income, namely net income.
6. To illustrate the change in property companies that are embedded in the company, should be drawn Statement of Changes in Equity. This report can be combined with the Income Statement, when information changes in number. In this report the company is often called the Statement of Changes in retained earnings due to capital changes generally occur in retained earnings post only. However, if the changes are also happening at posts other owners of capital will need to establish a complete statement of changes in equity.

Extraordinary posts

1. The accountants (including IAI) now tend to use the all-inclusive concept in the preparation of the statement of income for a company.
2. Only post is also charged or credited directly to the account of retained earnings is prior period adjustments resulting from the correction of errors, and certain accounting changes that require a rearrangement of prior year financial statements.
3. The entire profit or loss is exceptional and rare immediately closed to the Income Summary account of loss and is reported in the statement of income.
4. Transactions unusual materials, and rare are presented separately as a group of extraordinary items. Other outposts that amount of material, but can not be classified as an extraordinary item is reported and disclosed separately.
5. The cumulative adjustment resulting from changes in accounting principles disclosed separately before net income.
6. Termination segment of a company’s activities are classified separately in the statement of income after income from ongoing activities and before exceptional items.

Balance

1. Balance is a report showing the financial posissi of a company at a given moment. This financial position includes the state of assets, liabilities and equity of a company. By connecting certain posts in the development of the balance sheet, we can assess the state of liquidity, solvency and financial flexibility of the company. Therefore, the balance sheet should be arranged systematically by using classification in accordance with generally accepted accounting principles.
2. The classification and presentation of items in the balance sheet is performed as follows.
* Current asset. Presented in the order of liquidity, meaning that immediate post can be melted into cash is presented at the top.
* Investation. Investment in subsidiaries or affiliated companies must be presented separately.
* Fixed assets. Can be divided into tangible fixed assets and intangible assets. The posts are fixed assets in the balance sheet according to its immortality. Fixed assets whose age is the longest presented at the top, while the fixed assets whose age is shorter presented below.
* Other assets. Classification of other assets are used for accommodating posts non-current assets that can not be grouped in the above classification.
* Current liabilities. Posts current liabilities presented in the order likuditasnya. Current debts are paid promptly served in top order.
* Long-term obligation. Presentation of long-term liabilities should disclose the ties that exist in the contract of long-term debt is concerned, such as interest rate, maturity date, the assets used as collateral and so forth.
* Equity owners. Equity is part owner of the rights in the company, namely the residual interest in the assets of the company after deducting all liabilities. Equity are presented in the balance sheet at its immortality. Types of capital that are most conserved presented at the top, and the less the eternal presented below.
3. Balance can be prepared using forms account (account) or the form of a report. In the form of account (form skontro) assets are reported on the left side and liabilities and owner’s equity on the right. In a report, part of the assets, liabilities and owner’s equity arranged vertically (from top to bottom). The shape of this report is more popular because it can compare the two pieces of sheet or more for successive years.

Notes to the Financial Statements

1. In addition to the posts contained in the company’s ledger, the balance also needs to be presented additional information that may be conditional event, wisdom and discretion assessment of accounting is used, long-term contracts and a later episode.
2. Mechanical presentation of additional information can be done in the form of brackets, footnotes, supporting schedules, cross reference and contra account.

Scope of Cash Flow Statement

Cash flow statement is a financial statement that presents information about the company’s cash receipts and expenditures during the accounting period.

1. The purpose of the cash flow statement is to provide information about the sources and uses of cash and cash equivalents during the accounting period and the reconciliation of cash at the beginning of the period with a cash balance at the end of the period plus the cash equivalent.
2. The general form of the cash flow statement shows cash receipts and disbursements which are divided into three categories, namely: cash flows from operating activities; cash flows from investing activities and cash flows arising from financing activities.
3. Operating activities are the principal revenue-producing activities of the company (principal revenue producing activities) and other activities that are not investing activities and financing activities. Cash flows arising from operating activities can be reported using between the two methods, either directly or indirectly.
4. Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents.
5. Activities of funding are activities that result in changes in the amount and composition of capital and loan companies.
6. Cash flow from operating activities is derived from the company’s normal production activity and sales of goods and services.
7. Cash flows from investing activities from the activities of the purchase or sale of fixed assets, buildings, equipment, notes receivable and investments.
8. Cash flows from financing activities derived from the increase or decrease in debt financing and equity financing and payment of a dividend to shareholders.

Use of the Cash Flow Statement

1. The cash flow statement is a report that is relatively new, effective force in Indonesia since 1994. The cash flow statement can be prepared using the direct method or the indirect method. SFAS No. 2 called for statements of cash flows prepared using the direct method.
2. Classification of cash flows vary between different countries. But in general, there are three categories of cash flows: (1) cash flow from operating activities, (2) cash flows from investing activities, and (3) cash flow from financing activities (financing). British accounting standards make the classification of cash flows of the most complete. In the UK the cash flows are grouped into eight categories.
3. There are eight patterns of cash flows. Positive operating cash flow shows the financial condition is better than the negative operating cash flow. Negative investment cash flow shows the company is conducting business expansion, whereas if the cash flow of negative investment describe the company trying to find funds to cover the operating cash flow deficit. A positive financing cash flow shows the company is looking for sources of external funding to cover the current deficit or to expand their operations. While the negative financing cash flow shows the company is to repay the loan to the creditors or return capital to shareholders.


Leave a Reply

17 − 8 =