chapter 10 Flashcards
General purpose financial report
- inteneded to meet the information need of a range of users
- need for guidance
- consistent
- > intended to develop logical, consistent standards
current asset
resource controlled by the entity as a result of past events and from which further economic benefits are expect to flow to the entity
proposed asset
economic resource controlled by entity
- result of past events
current liability
- present obligation of the entity
- arising from past events
equity
residual interest in the assets of the entity after deducting its liabilities
income
- increases in economic benefit during acct period
- in the form of inflows or enhancements of assets
- or decreases of liabilities that result in increases in equity
expenses
- decreases in economic benefits during acct period
the reporting entity
any entity where it is reasonable to expect the existence of users depdnding on general purpose financial reports for information used in economic decision making
qualitative characteristics of financial information
- relevance
- faithful representation
- comparability
- consistency
- verifiability
- timeliness
- understand-ability
relevance
quantity of financial information that influences econ. decisions by helping users to form predictions
faithful representation
- to be useful to the main user group in making resource allocation decisions, information must be a faithful representation of the real-world economic phenomena
comparability
- enables users to discern and evaluate similarities b/w transactions and events
consistency
- notion adopted, it should not be changed from period to period
concepts of capital
- financial capital: measures either in terms of actual number or calculated dollars.
- net assets or equity of an entity
physical capital:
- > capital is the operating capability of the entity’s assets.
- > profit exists only after the entity has set aside enough capital to maintain the operating capability of its assets
