Chapter 5 Flashcards
are reports
that summarize important
financial accounting information
about your company or business.
Financial statements
three main types of
financial statements
- balance sheet,
- income statement, and
- statement of cash flows.
the statement
of financial condition or
financial position that gives the
user information about the
condition of the business
enterprise as of a given period.
Balance sheet
this word means that the
statement contains cumulative
figures from the start of the
business commercial operation up
to the present statement data.
“as of”
List of assets, liabilities, and equity
accounts.
balance sheet
Assets – Liabilities = ??
Net worth or equity
the statement
of the results of operation.
Income statement
It is the statement that gives
information to the users the idea
whether the business enterprise
makes profit or losses for a
period of time.
Income statement
also called “Statement of financial performance”
Income statement
Also called “Statement of Profit and Loss”
Income statement
this word means that
the statement contains figures
that transpired only during the
period of the statement date.
“for a period”
Total income – Total expenses =
???
Net profit or loss
The
statement that gives information to
the users about the cash sources
and the cash uses of the business
enterprise during a given period of
time.
Statement of Cash Flow
also called “Movement of cash balance”
Statement of Cash flow
How much actual cash and cash
equivalents entered and left the
company during a given period of
time
Statement of Cash Flow
What is the objective of
financial accounting?
Quantitative
the attributes
that make the information useful to
others.
Qualitative characteristics
what are the Fundamental qualitative characteristics
a.1 Relevance (R)
a.2 Faithful Representation (FR)
Enhancing Qualitative
characteristics
b.1 Comparability
b.2 Verifiability
b.3 Timeliness
b.4 Understandability
capable of making
a difference in the decision made
by users, influences the
economic decisions of users by
helping them to evaluate, past,
present, or future events or
confirming, or correcting, their
past evaluations.
Relevance
can be used as input to processes
employed by users to predict
future outcomes.
Predicted value
provides
feedback about (confirms or
changes) previous evaluation.
confirmatory value
To be
useful, financial information must
not only represent relevant
phenomena, but it must also
faithfully represent the phenomena
that it purports to represent.
Faithful representation
includes all information
necessary for a user to
understand the event or
information being presented,
including all necessary
descriptions and explanations.
completeness
presentation
is one without bias.
neutrality
no errors or omissions
Freedom from error
Means that different
knowledgeable and independent
observers could reach
consensus, although not
necessarily complete agreement,
that a particular depiction is a
faithful representation
Verifiability
It enables the
users to identify and understand
similarities in, and differences
among, items.
Comparability
Means
classifying, characterizing, and
presenting information clearly
and concisely.
Understandability
Means having
information available to
decision-makers in time to be
capable of influencing their
decisions.
Timelines
measurement of financial
position
assets, liabilities
measurement of performance
income, expense
process of
incorporating in the balance
sheet or income statement an
item that meets the definition of
an element and satisfies the
criteria for recognition.
recognition
process of determining
the monetary amounts at which
the elements of financial
statements are to be recognized
and carried in the balance sheet
and income statement.
Measurement
gives us the
following guidelines in the
presentation of financial
statements.
PAS
