notes i Statements W2 Intro Flashcards
Assets
Def
Assets:
Present economic resource/ right with potential to produce economic benefits, controlled by the entity as a result of past events.
Operating capacity & investment decisions
PCP
- Resource, potential to produce economic benefit
Probable
Entitled - Controlled
Direct the use to obtain benefits
Prevent others
Single assets = 1 or a set of rights - Past event
Result
Liability
Def
Present obligation of the entity to transfer an economic resource as a result of past events
External claim
O T P
- Obligation
Duty, responsibility
No practical ability to avoid
Legally enforceable or constructive obligation (customary practices etc.) - Transfer of an economic resources
Potential, not certain
To another party - Result of past events
Already obtained economic benefits
Already taken action
e.g. may be accumulated over time (wages owing etc.)
Exists even if settlement is not enforced until future
Equity
Def
Equity:
Residual interest in assets – liabilities
Claims by owners
- Contributed equity
- Retained profits
Does not reflect value of firm
Stocks
Def
Which components?
Which statements?
Stocks:
Economic resources and claims at reporting date
Asset
Liability
Equity
Statement of financial position
Flow
Def
Which components?
Which statements?
Flows:
changes in economic resources & claims for reporting periods ending on reporting date
Statement of financial performance
- Reflected by accrual accounting
- [reports effects of transaction even if payment occurs in different period]
Statement of cash flow
Statement of equity
- Changes in economic resources and claims
Income
Def
Key characteristic
Increase assets or decrease liabilities or increase equity except contributions
Key characteristics:
Earned
Obligation satisfied e.g. provide G&S
Expense
Def
Key characteristic
Assets decrease or liability increase or decrease equity except equity distributions
Key characteristics: Consumed
inventory , labour, PPE used, resulting in cost of sales, wages, rent, depreciation
Expense vs expenditure vs cost
Unit of account:
Def
Unit of account:
How assets and liabilities are grouped together for recognition, measurement & disclosure purposes
Relevant in providing useful information
Similar economic characteristics & risk
Derecognized:
Def
When for assets?
When for liabilities?
Derecognized:
Removal of recognized asset or liability from position
No longer meets definition
Recognition of corresponding income or expense may coincide
Not recognized:
Notes
Assets: Consumed Collected Transfer Expired
Liabilities:
Settled
Fulfilled
Useful
2 Criteria
Existence certainty-
Measurement certainty-
