Chapter 2: Measuring and Reporting Financial Position Flashcards
Asset
A resource controlled by the business that has:
probable future economic benefit, exclusive rights to control by business, arisen from past event, capable of monetary measurement.
Claim
An obligation on the part of the business to provide cash or some other benefit to an outside party.
Liabilities
Claims of individuals and organisations, apart from the owners, that have arisen from past transactions or events
Owners Equity
The claim of the owner(s) on the assets of the business
Provisions
An estimated liability for which there is greater uncertainty regarding the amount or timing of the amount that for a normal liability.
Contingent Liability
A potential liability that might arise in the event of something particular occuring
Current Assets
Assets not held on a continuing basis and are expected to be consumed or converted into cash within 12 months.
Non-Current Assets
Assets held to generate wealth rather than be for resale, seen as tools, and are kept usually continually or more than 12 months.
Current Liabilities
Amounts due for repayment to outside parties within 12 months after statement of financial position date.
Non-Current Liabilities
Those amounts due to other parties which are not liable for repayment within the next 12 months after statement of financial position date.
Business Entity Convention
For accounting purposes, the business and its owner(s) are treated as separate entities.
Historic Cost Convention
Assets should be recorded at their historic (acquisition) cost.
Prudence Convention
Financial Reports should err on the side of caution, effectively anticipating losses but only recognising profits when they are realised.
Going Concern Convention
Assumption that business will continue operations for the foreseeable future, with no intention or need to liquidate business.
Dual Aspect Convention
Each financial transaction has two aspects and each aspect must be recorded in the financial statements.
