Concept of Financial Statements


The owners and business managers need to have current financial information to make appropriate decisions about its future operations. The financial information of a business is registered in the ledger accounts. However, transactions that occur during the fiscal period alter the balances of these accounts. The changes should be reported regularly in the financial statements.


In the complex world of business, today marked by the globalization process in companies, financial information plays an important role in producing essential data for management and development of the economic system.


Accounting is a discipline of human knowledge that allows to prepare general information on the economic entity. This information is shown by the financial statements. The term "financial statements" includes: balance sheet, profit and loss, statement of changes in equity, cash flow statement (AFP), notes, other statements and explanatory material, which is identified as part of the states financial statements.


The key features that must have the financial information are useful and reliability.


The utility, as a characteristic of financial information, is the quality of adapting it for the purpose of users, among whom are shareholders, investors, employees, suppliers, creditors, government and, in general, society.


The reliability of the financial statements reflects the truth of what is happening in the business.


Financial Statements


Financial statements presented in constant pesos or profits generated resources in the operation, the main changes in the financial structure of the institution and the final reflection in cash and cash equivalents through a specified period. The term "constant dollars, pesos of purchasing power represents the balance sheet date (the last year reported the case of comparative financial statements).


Some financial statements


State Projected Financial Statements


Statement at a future date or period, calculations based on estimates of transactions that have not yet been made, it is a condition that frequently accompanies estimated a budget, a Performa statement.


Audited Financial Statements


They are those who have gone through a process of review and verification of information, this test is performed by independent public accountants who finally express an opinion on the reasonableness of the financial position, operating results and cash flow that the company submits in financial statements of a particular exercise.


Consolidated Financial Statements


Those that are published by companies that are legally independent financial position and value, as if the operations of the companies were a single legal entity.


Classes Of Financial Statements


1. Balance statements.


2. Statement of Income or Capital


3. State Flow


4. Others.



Balance Statements


Accounting document that reflects the assets of a company at a time. It has two parts, active and passive. The asset shows the assets of the company, while financial liabilities detailing its origin. The legislation requires that this document is accurate picture of the state assets of the company.


The asset is usually divided into fixed and current assets. The first includes movable and immovable property which form the physical structure of the company, the second treasury, the receivables and merchandise. On the liability distinction between equity, long-term debt and liabilities. The first are the funds of the society (social capital and reserves), the long-term liabilities are the long-term debts (loans, bonds), and current liabilities are short-term foreign capital (trade credit, short debt ). There are several types of balance at the time and the basic state demonstrative of a company's financial situation, to a certain date, prepared in accordance with basic principles of government accounting including assets, liabilities and capital accounting.


It is an accounting document that reflects the financial situation of an economic entity, whether public or private organization, to a certain date and allows a comparative analysis of the same and includes the assets, liabilities and stockholders' equity.


It is formulated according to a standard format and approach to the basic company information can be obtained uniformly such as: financial position, capabilities and profit funding sources.


Comparative Balance Sheet


Statement on comparing the different elements in it for one or more periods, in order to show the changes in a company's financial position and facilitate analysis.


Consolidated Balance Sheet


Is one that shows the financial position and results of operations of an entity composed of the holding company and its subsidiaries, as if all were a single economic unit.


It is formulated by replacing the reversal of the holding in shares of subsidiary companies, with assets and liabilities thereof, eliminating the balances and transactions between different companies, and the unrealized profit entity.


Other financial statements


Estimated Balance Sheet


It is a financial statement prepared with preliminary data, which usually are subject to correction.


Performa Balance Sheet


Accounting statement showing amounts attempts, prepared to show a proposal or a probable future financial situation.


Methods Of Presentation Of The Balance


The presentation of the various accounts making up the balance can be carried out according to their increasing or decreasing order of liquidity. The method is increased when presented first or most liquid assets available, and then this order of importance in other accounts. It is said that the balance is classified in order of decreasing liquidity and liability when the assets are first presented and finally, noting that order or current realizable assets.


Operational Financial Balance Of Public Sector


State financial operations showing income, expenditures and deficit of the agencies and entities of the Federal Public Sector deducted from the netted transactions made between them. The difference between total expenditure and revenues generated by the economic deficit or surplus.


Budget Balance


Public Sector Primary Balance


The primary balance is equal to the difference between total revenues of the Public Sector and total expenses, excluding interest. Because most of the interest payments on a fiscal year is determined by the accumulation of debt from previous years, the primary balance measures the effort made in the current period to adjust public finances.


Income Statement


Accounting document that shows the operating results (profit, loss and excess residual) of an entity during a given period.


Presents the financial position of a company at a given date, using as parameter the income and expenditure, providing the enterprise's net profit. Sheet usually accompanies the Balance Sheet.


State that shows the difference between total revenue in its various forms, sale of goods, services, fees and contributions and expenditures represented by cost of sales, cost of services, benefits and other expenses and products Parastatal Sector entities in a given period.


Statements Of Operations


Budgetary obligations to pay are those dependencies from the Expenditure Budget of the Federation for third parties, amounts withheld from contractual and legal relationships, such as taxes, fees, premiums and contributions to leading payment remuneration for the following beneficiaries: Institute of Security and Social Services for State Workers, Social Security Institute for the Mexican Armed Forces, National Bank of the Army, Air Force and Navy, CNS, Refund Guarantee Fund to the Federal Treasury , Aseguradora Hidalgo, SA, compounded Savings Fund, Alimony, union dues and similar concepts.


These are some divisions of the state of operations


Operator to compensate


Are those that are matched by income outflows for the same amount, settling a trade-off.


Open Market Operations


They consist of the purchase and sale of securities by the Bank of Mexico to directly influence liquidity in the system.


These are the measures by which the central bank controls the monetary system by buying and selling securities, mainly government bonds to commercial banks and the public. These operations are carried out to influence the level of liquidity and structure of interest rates in financial markets.


Virtual Operations


Are those operations that do not constitute a monetary transfer of resources, ie revenue operations offset by outflows, becoming purely accounting entries.


Statement Of Cash Flows


Movement or movement of certain variable within the economic system. The flow variables, assume the existence of an economic flow and are characterized by temporal dimension are expressed in quantities necessary measures for a period, such as consumption, investment, production, exports, imports national income, etc.. The flows are intimately related to the funds, as both come from the other. Thus, the variable depth "in real estate assets" leads to variable flow "rentals", while the variable flow "Wheat production in the period X" results in variable depth "stored wheat.


He who in advance, shows the cash outflows and inflows that will occur in a company for a specified period. That period is usually divided into quarters, months or weeks, to detect the amount and duration of cash shortages or surpluses.


EFE means the basic financial statement showing changes in financial position through cash and cash equivalent of the company in accordance with Generally Accepted Accounting Principles (GAAP), ie in accordance with International Standards Accounting Standards (IASs).


The EFE offers the entrepreneur the ability to understand and summarize the results of the financial activities of the company within a specified period and to infer the reasons for the changes in their financial situation to be an important aid in cash management, control of capital and the efficient use of resources in the future.


These are the background and current applicable regulation governing the preparation and presentation of cash flow statement in our country. However, it should highlight and summarize very briefly three standards that match in content. They represent the consistency and standardization of national accounting doctrine and universal:


The statement establishes standards for the cash flow report replaces the opinion of APB No. 19, requires a cash flow statement as part of the financial statements for all companies rather than a statement of changes in financial position. The declaration requires that the EFE are classified receipts and cash payments as they arise from operating, investing or financing activities and provides definitions for each category.


For most institutions will not be difficult to meet this standard, but for banking companies and companies with overseas operations can pose a major difficulty in the preparation and presentation process. The cash flow statement can be prepared under two methods: direct and indirect.


Revised in 1992, and applies to financial statements for periods beginning on 1st. January 1994 or thereafter, revokes the IAS 7 Statement of changes in financial position, adopted in July 1977.


The application of the cash flow statement affects all companies, would allow all users to assess the changes in equity of a company, its financial structure and its ability to influence the amounts and timing of cash flows in order to adapt to changing circumstances and opportunities.


Cash Flow


State shows the movement of income and expenses and the availability of funds to a certain date.


Movement of money within a market or economy as a whole.


Flow Of Funds


Movement into and out of cash that shows the interrelationships of resource flows between the private, public and external, occurring both in the real sector and through the financial system.


Net Cash Flow


Is the difference between net income and net disbursements, discounted to the date of approval of an investment project with the technique of "present value", this means taking into account the value of money versus time.


Information Statement Of Cash Flows For Decisions On Business


a. The value of information .- The information given by the EFE reduces uncertainty and supports the process of decision making in an enterprise, which is why the information provided by this basic statement is characterized by accuracy, by the way be structured and presented, often in which there is scope, source, timing, relevance, timeliness, and be complete.


The value of the information given by this basic statement is also in the message, the additional economic gain can be achieved by rely on this information, and so on. The value does not depend so much information that contains the message, but its relation to the amount of knowledge previously collected and stored.


b. Management decisions in business management .- The EFE is intended to provide fresh information to enable the respective bodies continue to seek the set objectives, anticipate problems and confront situations that may arise even though everything is perfectly calculated.


c. Applications of the State of Cash Flows .- It is considered one of the main applications is given to the EFE is aimed at ensuring that money to shareholders, thus giving information on how to move revenues and expenditures of money . The EFE allows the company to ensure a stable and permanent liquidity for the company to develop its proper management.


It should be noted that a correct application of the EFE and optimal management of information it provides helps ensure strength, competitiveness and reliability of the various users of corporate information and provide stability to the country's economic system.


d The effective flow control .- A company looking for revenue and profits, but must ensure that its shareholders and customers check investment and trust. That is why if the company does not have a permanent and efficient control of their cash inflows and outflows (Box, cash) and investments in general, just living a slow death and finally extinguished. If, however, look after and care to achieve their objectives and goals are ensuring their survival and profitability to its customers business system stability and economy.





1. Is detected between the accounting profession difficulties at the time of the preparation and presentation of EFE, often due to inadequate enforcement and often the failure of the technical and legal regulations on this financial statement. Not only are there difficulties in preparing and presenting the income statement, but also there is no nationwide uniformity of views on the methodology or approach in the analysis of the EFE, which makes it harder to get adequate and timely interpretation.


2. Information provided by the EFE is not used by the accounting profession nor by the various users of the country's banking business, nor by regulatory agencies, regulatory and control the domestic banking system.


3. Being the EFE useful for various users in:


4. Provide information not contained in financial statements and other classify flows by type of activity or transaction in the circumstances of the current economic environment (economic instability), at which time the users of this and other financial statements demand a more comprehensive and clear information on the generation and application of resources (cash and equivalent) by area and by sector, the EFE is a timely tool to more objectively assess the liquidity or solvency of the banking companies. For these reasons it is considered that the EFE should adequately meet the information needs of users and become a tool that meets the above purposes.



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