Chapter 1: Purpose of Financial Statements Flashcards
Long-Term Profit
Long-term profit is when a company pays for a major investment that may help increase profit in future years
Profit or Loss and Other Comprehensive Income
Measurement of the financial performance of the company for a particular time period.
Statement of Changes in Equity
Changes that have taken place to the shareholders stake in the company for the accounting period.
Statement of Financial
The list of assets, liabilities and equity at the end of the accounting period.
Statement of Cash Flow
The change in assets and liabilities and the effect on the cash of the company.
The Objective of Financial Reporting
‘The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions relating to providing resources to the entity’ - Conceptual Framework for Financial Reporting.
General Purpose Financial Reports
They provide information about the financial position of a reporting entity.
Financial Information
Is given about the financial position, performance and changes in financial position of the reporting entity.
Income
- Increase in assets
- Decrease in liabilities
- Increase in equity other than those
contributed by the holders of equity
claims.
Expenses
- Decrease in assets
- Increase in liabilities
- Decrease in equity other than those
related to distributions to the holders of
equity claims.
Profits
- Increase in equity not resulting from
contributions from holders of equity
claims.
Losses
- Decreases in equity not resulting from
distributions to holders of equity claims.
Assets
- A present economic resource
- Controlled by the entity
- As a result of past events
Equity
- Residual interest in the assets after
deduction all it’s liabilities.
Liability
- A present obligation of the entity to
transfer an economic resource - As a result of past events
