01.03- Elements of Financial Statements Flashcards

1
Q

What is included in a full set of FINANCIAL STATEMENTS?

A
  • Statement of Position (Balance Sheet)
  • Statement of Earnings Financial & Comprehensive Income (Income Statement)
  • Statement of Cash Flows
  • Statement of Changes in Owners’ Equity (statement of investments by and distributions to Owners)
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2
Q

What are the three basis elements that make up all financial statements?

A
  • Assets
  • Liability
  • Equity
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3
Q

What are ASSETS?

A

An economic resource that has a probable future benefit, one can obtain the benefit, and the transaction creating the benefit has already occurred.

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4
Q

What are LIABILITIES?

A

An economic obligation in which one needs to use or transfer an asset. The obligation cannot be avoided and the transaction has already occurred.

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5
Q

What is EQUITY or NET ASSETS?

A

Assets left over after deducting liabilities.

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6
Q

What are the three elements of EQUITY?

A
  • Contributions/investments by owners
  • Distributions to owners (dividends)
  • Comprehensive income
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7
Q

What is COMPREHENSIVE INCOME?

A

All changes in equity other than “owner” sources.

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8
Q

What are four examples of COMPREHENSIVE INCOME?

A

DENT

  • Derivative cash flow hedges
  • Excess adjustment of Pension
  • Net unrealized gains or losses on “available-for-sale” securities
  • Translation adjustments for foreign currency
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9
Q

What is the PHYSICAL CAPITAL MAINTENANCE CONCEPT?

A

You only recognize an event when an asset is sold or a liability is settled.

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10
Q

What is the FINANCIAL CAPITAL MAINTENANCE CONCEPT?

A

You only recognize an event as a change in the value of an asset or a liability occurs.

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11
Q

Which maintenance concept is used when accounting for FIXED ASSETS?

A

Physical Capital Approach

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12
Q

Which maintenance concept is used when accounting for MARKETABLE SECURITIES?

A

Financial Capital Approach

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13
Q

What are the four elements of COMPREHENSIVE INCOME?

A
  • Revenues
  • Expenses
  • Gains
  • Losses
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14
Q

What do REVENUES and EXPENSES represent?

A

Inflows and Outflows from primary operations.

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15
Q

What do GAINS and LOSSES represent?

A

Increases and Decreases in equity from incidental transactions.

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16
Q

What is CONSISTENCY?

A

Using the same principles year after year

17
Q

What is CONSERVATISM?

A

Considering all risks inherent in a business

18
Q

What is COST/BENEFIT?

A

Acknowledging that costs shouldn’t exceed benefits to be derived.

19
Q

What is MATCHING?

A

Recognizing a cost as an expense in the same period as the benefit is recognized.

20
Q

What is ALLOCATION?

A

Spreading a cost over more than one period.

21
Q

What is FULL DISCLOSURE?

A

Providing all useful information in financial statements.

22
Q

What is RECOGNITION?

A

Booking an item in the financial statements.

23
Q

What is REALIZATION?

A

Converting non-cash resources into cash

24
Q

When should an element be recognized in a financial statement?

A
  • Meets the definition of an asset or a liability
  • Capable of being measured in monetary terms
  • Relevant and Faithfully Represented
25
What is HISTORICAL COST?
Amount you paid for it
26
What is REPLACEMENT COST?
The cost to replace an item
27
What is FAIR MARKET VALUE?
The price that would be received to sell an asset or paid to transfer a liability between market participants on a measurement date
28
What is NET REALIZABLE VALUE?
Amount expected to be converted into
29
What is the PRESENT VALUE?
The time value of money.