Diana has started a small business of selling cakes at a student mall. She has also created a system for recording transactions, to make it easier for her to focus on the business. She has learnt how to the prepare financial statements, which have been useful in showing the effect of all the decisions made in her business. She wants to expend her business, and intends to take out a loan from the bank. She has collected all the necessary information required by the bank. Dianne makes an appointment to meet with the bank's manager, and brings along a few huge boxes full of purchase invoices, sales invoices, receipt and returned cheques. She believes perhaps this would be useful to explain about her business.

The bank manager, Mr Brundt, is surprised to see the boxes, presumably for the whole year, ready for him to review. He looks at Dianne and says, I need a complete set of financial statements, which would show me the required information and so that I can analyse them. This will help me to decide on whether or not I should finance your business. Financial statements prepared using the Conceptual Framework for Financial Reporting will be a good way to communicate the financial information of your business'.

Dianne is perturbed and she asks for your advice. Dianne needs to understand financial statements according to the conceptual framework.

Required:

(a) Explain to Dianne what is meant by an entity's financial position and performance.

(b) Advise Dianne on how to identify four financial statements that make a complete set of financial statements according to MFRS101 Presentation of Financial Statements.