CHAPTER 3 Flashcards
are structured representation of financial position and Financial Statemence of an entity
Financial statements
What are the objective of financial statements give 3
Provide information (financial position,financial performance and cash flows)
The financial statements that are prepared to provide useful information to a wide ray of users
General-purpose financial statements
The financial statements that are prepared to provide useful information to a wide ray of users
General-purpose financial statements
In layman’s language financial statements are
end products
What does IFRS means?
Fair presentation, and compliance with International Financial Reporting Standard.
what does ias mean
International Accounting Standards
What are the remaining 5 conditions in going concern and Accrual Basis of accounting?
Materiality and aggregation,off setting, frequency of reporting and comparative information, consistency of presentation, identification of the financial statements.
An entity shall present such material, class of similar items.
Materiality And Aggregation
An entity shall not offset assets and liabilities, income and expenses unless required and permitted by an IFRS.
Offsetting
An entity shall present with equal prominence each financial statement in a complete set of financial statements, including comparative information in respect of the previous period for all amounts record reported in the current pre its financial statement at least annually.
Frequency of Reporting and Comparative Information
An entity shall retain the presentation and classification of items in the financial statements in successive periods, unless an alternative would be more appropriate or an IFRS requires a change in presentation.
Consistency of Presentation
An entity shall clearly identify the financial statements, and distinguish them from other information in the same published document.
Identification of the Financial Statements
What are the six basic financial statements as per revised IAS? Number 1
No.1, Balance Sheet. No. 2, Income Statement. No. 3, a statement of changes in equity for the period. No. 4, a statement of cash flows for the period. No. 5, notes pricing, a summary of significant accounting policies and other explanatory information. No. 6, a statement of financial position.
Is a financial statement that shows the financial position of an enterprise as of a particular date.
Statement of Financial Position
Is the stability of the enterprise to meet currently maturing obligations.
Liquidity
Is the availability of cash over the longer term, to meet maturing obligations.
Solvency
Is the availability of cash over the longer term, to meet maturing obligations.
Solvency
Like, is the source of financing for assets of the enterprise, and indicates how much is borrowed capital and how much is equity capital.
Financial Structure
Is the financial flexibility of the enterprise to use the available cash for unexpected requirements and investment opportunities.
Capacity for Adaptation
The statement of Financial Position, previously known as Balance Sheet, shows the.
Assets, Liabilities,Owner’s Equity
Assets,Liabilities and Owner’s Equity are called?
Accounting Values
In layman’s language, these are the things of value or rights that are owned and used by the business in the conduct of its operation, such as cash, land, building inventories, furniture and fixtures, machinaries and equipment, prepaid expenses.
Assets
Assets includes accounts collectible by the business, which we term as.
Receivable
In layman’s language, these are debts or financial obligations of the business that are payable in cash or in some kind of assets such as accounts payable, notes payable, salaries payable, mortgage payable.
Liabilities
In layman’s language, this refers to money or value of property put by the proprietor into the business to start with, which refers to initial investment.
Owner’s Equity
Owner’s equity is expressed in the equation as
A-L=OE
Which is previously known as “income statement”, it’s a financial statement that shows the “results of operations”of the business for a given period of time.
Statement of Comprehensive Income
Statement of Comprehensive income consists of 3 sections
Revenue or Income, Expenses,and Profit or Loss
Denote money or proceeds from services rendered by a servicing company or income from use by other entities of the resources of the enterprise, such as rent income, royalties.
Revenues or Income
Denote the benefit received by the business from its use, which had help in carrying out its operation like salaries expense, rent expense, repairs and maintenance, taxes and license.
Expenses
The excess of revenues over expense
Profit
Excess expenses over revenue
Loss
Is a financial statement that summarizes the changes in equity for a given period of time.
Statement of Changes in Owner’s Equity
Is a financial statement that provides information about the causes of change in an entity’s cash balance, from the beginning to the end of a given period of time.
Statement of Cash Flows
What are the 3 Major Activities of statement of cash flows?
Operating Activities, Investing Activities, Financing Activities
Activities that are cash inflows and outflows, generated from normal operations or day to day transactions of the business.
Operating Activities
Activities that these are cash inflows and outflows generated from following some transaction such as cash received from sale of property and equipment, cash paid to purchase of asset other than inventory.
Investing Activities
Activities that these are cash inflows and outflows generated from following some transaction such as cash received from sale of property and equipment, cash paid to purchase of asset other than inventory.
Investing Activities
These are cash inflows and outflows generated from following transactions, cash received from cash investment by owner, cash received from loan obtained from bank, cash paid to payment of loan from bank and other lender, cash paid to payment of owners withdrawal.
Financing Activities
These are cash inflows and outflows generated from following transactions, cash received from cash investment by owner, cash received from loan obtained from bank, cash paid to payment of loan from bank and other lender, cash paid to payment of owners withdrawal.
Financing Activities
