Financial Statements: March Explained

Let’s resume our exercise. In the upcoming video, our faculty member will brief you about the operations carried out in March.

Now that you are aware of the operations carried out in March, use the excel file "The Pizza Food Truck Exercise", provided at the beginning of the session, and try to fill in the three financial statements based on the transactions given.

Now, let’s hear from our faculty member Marie-Lys as she debriefs the operations carried out in March and how it translates into the financial statements.

In this video, you learnt the following: 

• The truck purchased in March will be recorded as an asset as it is going to provide future economic benefits to the company for 3 years. 

• Partial payment for the truck is to be made in April; hence, this is a future liability for the business.

• Since the truck is going to be used for 36 months, as per the matching principle, 1/36 of the purchase value of the truck must be expensed in the income statement for the current period. This is known as depreciation. 

  • It is an operating cost as it is linked to operations.

  • It is a non-cash expense. 

  • The value of depreciation is subtracted from the gross value of the truck to determine the net value of the truck.

• The truck’s insurance is a recurring cost that the company needs to pay every month. This value would be expensed in the income statement irrespective of the cash or credit purchase of the truck. 

• Owner’s equity is the sum of share capital, retained earnings and profit for the current period.

In the next segment, you will get to see how different activities for the month of April impact the three financial statements.