BMZ Academy
Table of Contents
QUESTION 1 ............................................................................................................. 2
By using practical examples, demonstrate how you would go about
constructing financial statements of your small business. (30) .......................... 2
Financial statements ............................................................................................ 2
Importance of financial statements..................................................................... 2
financial statements preparation......................................................................... 2
1. Recorded facts .............................................................................................. 2
2. Accounting conventions .............................................................................. 3
3. Personal judgments ...................................................................................... 3
3 types of financial statements............................................................................ 3
Balance sheet .................................................................................................... 3
Income statement.............................................................................................. 5
Cash flow statement ......................................................................................... 6
QUESTION 2 ............................................................................................................. 7
By using practical examples, demonstrate how you would go about conducting
financial forecasting for your business. (20) ......................................................... 7
4 common types of financial forecasting ........................................................... 7
1. Sales forecasting .......................................................................................... 7
2. Cash flow forecasting ................................................................................... 8
3. Budget forecasting ....................................................................................... 9
4. Income forecasting ....................................................................................... 9
BMZ ACADEMY 061 262 1185/068 053 8213/0717 513 144
, BMZ Academy
QUESTION 1
By using practical examples, demonstrate how you would go about
constructing financial statements of your small business. (30)
Financial statements
Financial statements are reports that explain a company’s financial performance and
profitability for a certain period of time. There are three basic financial statements:
balance sheets, income statements (or profit and loss statements), and cash flow
statements. Business owners use other financial reports, such as the statement of
retained earnings, less frequently.
Importance of financial statements
Financial statements are important because they let stakeholders—such as
shareholders, creditors, and regulators—understand a company’s overall financial
performance and health. Public companies are required to publish their financial
statements in an annual report. Typically, financial statements provide information
about a business’s:
• Economic resources and obligations
• Earning capacity
• Potential cash flows
• Management status
• Accounting policies
Most importantly, financial statements help business owners better understand their
bottom lines and make smarter business decisions.
financial statements preparation
Because financial statements serve as fundamental sources of financial information,
one needs to apply basic accounting principles to ensure accuracy and consistency.
One can prepare financial statements using three principles.
1. Recorded facts
An original or historical cost of accounts can help prepare financial statements.
Typically, record prices and assets purchased at different times at the original cost.
BMZ ACADEMY 061 262 1185/068 053 8213/0717 513 144
Table of Contents
QUESTION 1 ............................................................................................................. 2
By using practical examples, demonstrate how you would go about
constructing financial statements of your small business. (30) .......................... 2
Financial statements ............................................................................................ 2
Importance of financial statements..................................................................... 2
financial statements preparation......................................................................... 2
1. Recorded facts .............................................................................................. 2
2. Accounting conventions .............................................................................. 3
3. Personal judgments ...................................................................................... 3
3 types of financial statements............................................................................ 3
Balance sheet .................................................................................................... 3
Income statement.............................................................................................. 5
Cash flow statement ......................................................................................... 6
QUESTION 2 ............................................................................................................. 7
By using practical examples, demonstrate how you would go about conducting
financial forecasting for your business. (20) ......................................................... 7
4 common types of financial forecasting ........................................................... 7
1. Sales forecasting .......................................................................................... 7
2. Cash flow forecasting ................................................................................... 8
3. Budget forecasting ....................................................................................... 9
4. Income forecasting ....................................................................................... 9
BMZ ACADEMY 061 262 1185/068 053 8213/0717 513 144
, BMZ Academy
QUESTION 1
By using practical examples, demonstrate how you would go about
constructing financial statements of your small business. (30)
Financial statements
Financial statements are reports that explain a company’s financial performance and
profitability for a certain period of time. There are three basic financial statements:
balance sheets, income statements (or profit and loss statements), and cash flow
statements. Business owners use other financial reports, such as the statement of
retained earnings, less frequently.
Importance of financial statements
Financial statements are important because they let stakeholders—such as
shareholders, creditors, and regulators—understand a company’s overall financial
performance and health. Public companies are required to publish their financial
statements in an annual report. Typically, financial statements provide information
about a business’s:
• Economic resources and obligations
• Earning capacity
• Potential cash flows
• Management status
• Accounting policies
Most importantly, financial statements help business owners better understand their
bottom lines and make smarter business decisions.
financial statements preparation
Because financial statements serve as fundamental sources of financial information,
one needs to apply basic accounting principles to ensure accuracy and consistency.
One can prepare financial statements using three principles.
1. Recorded facts
An original or historical cost of accounts can help prepare financial statements.
Typically, record prices and assets purchased at different times at the original cost.
BMZ ACADEMY 061 262 1185/068 053 8213/0717 513 144
