Chapter 5 to Chapter 6 Flashcards
What are the elements directly related to the measurement of financial position?
Assets
Liabilities
Equity
What are the elements directly related to the measurement of financial performance?
Income
Expense
This is the residual interest in the assets of the entity after deducting all of the liabilities.
Equity
This is defined as a present economic resource controlled by the entity as a result of past events.
Assets
This is a right that has the potential to produce economic benefits.
Economic resource
What are the 3 essential characteristics of an asset?
- It is a right.
- A present economic resource is a right that has a the potential to produce economic benefits.
- It is controlled by the entity.
This is a contract that is equally unperformed which means neither party has fulfilled any of its obligations, or both parties have partially fulfilled their obligations to an equal extent.
Executory Contracts
This is a present obligation of an entity to transfer an economic resource as a result of past events.
Liability
What are the 3 essential characteristics of a liability?
- The entity has an obligation.
- The obligation is to transfer an economic resource.
- The obligation is present and it results from past events.
This is a duty or responsibility that an entity has no practical ability to avoid.
Obligation
What are the two types of obligations?
Legal and constructive
This obligation is legally enforceable as a consequence of a binding contract or statutory requirement.
Legal obligation
These obligations arise from normal business practice custom and a desire to maintain good business relations or act in an equitable manner.
Constructive obligation
This is defined as increases in assets or decreases in liabilities that result in increases in equity, other than those relating to contributions from equity holders.
Income
This arises in the course of the ordinary regular activities and is referred to by variety of different names including sales, fees, interest, dividends, royalties, and rent.
Revenue
What is the essence of revenue?
Regularity