Definitions Flashcards
FUNDAMENTAL QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION:
RELEVANCE
Financial information is regarded as relevant if it is capable of influencing the decisions of users
FUNDAMENTAL QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION:
FAITHFUL REPRESENTATION
Financial information must be complete, neutral and free from error
FUNDAMENTAL QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION:
Qualitative characteristics - comparability
Should be possible to compare an entity over time and with similar information about other entities
FUNDAMENTAL QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION:
Qualitative characteristics - verifiability
If information can be verified this provides assurance to the users that it is both credible and reliable.
FUNDAMENTAL QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION:
Qualitative characteristics - timeliness
Information should be provided to users within a timescale suitable for their decision making purposes.
FUNDAMENTAL QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION:
Qualitative characteristics - understandability
Informtaion should be understandable to those that might want to review and use it. This can be facilitated through appropriate classification, characterisation and presentation of information.
THE ELEMENTS OF FINANCIAL STATEMENTS:
Assets
A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.
THE ELEMENTS OF FINANCIAL STATEMENTS:
Liabilities
A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
THE ELEMENTS OF FINANCIAL STATEMENTS:
Equity interest
The residual interest in the assets of the entity after deducting all of its liabilities.
It INCLUDES:
- funds contributed by shareholders
- retained earnings
- other gains and losses
THE ELEMENTS OF FINANCIAL STATEMENTS:
Income
Consists of both revenues and gains.
REVENUE arises from a business’s ordinary activities such as sale of goods.
GAINS represents increase in economic benefits eg gain on disposal of a non current asses. These are usually shown separately from revenue as they need to be disclosed separately to give a full understanding of the transaction.
Increases in economic benefits during the accounting period in the forms of inflows, or enhancements of assets, or decreases of liabilities that result in increases in equity (other than those relating to contributions from equity participants).
THE ELEMENTS OF FINANCIAL STATEMENTS:
Expenses
An expense represents a DECREASE or using up of economic benefits during an accounting period.
Eg wages, cost of sales, depreciation
Dividends to shareholders are NOT expenses.
Decreases in economic benefits during the accounting period in form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity (other than those relating to distributions to equity participants).
STEWARDSHIP
The accountability of management for the resources entrusted to it by the owners or the Government. Apploes to Financial Statements of Limited Companies as well as central & local government and the NHS
