Week 2 Introduction to Conceptual Framework and Main Elements of Financial Statements Flashcards
what are the main elements of the statement of finanical postion?
its baswed of the accounting equation
asset= equity + liabilities
Whats an asset?
An asset is an economic rescource controlled by an entity as a result of past events and from which they expect to recieev furture economic benefit from.
What does the statement of financial postion list?
statement of financial positon (SOFP) / balance sheet is a lsit of all assets and liabilities owed by a bsuienss at a particular date
what is a liability?
A liability is 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.
what is capital or equity?
Capital or Equity is the residual interest in the assets of the entity after deducting all its liabilities.
how is a statement of financial positon formatted?
non current assets
current assets
total assets
capital
non current liabilities
current liabilities
total capital and liabilities:
whats the income statement equation?
The income statement equation is:
revenues - expenses = Net Income
Whats the layout of the statement of income (SOI)?
Statement of income:
revenue
cost of sales/ cost of goods sold
opening + purchases - returns - clsoing
gross profit
less exoenses
net profit
what is the accruals concept?
Accounting journal entries are made when a good or service is sold rather than when cash is made or received.
What does earned mean?
Earned (revenue recognition or realisation concept) – a sale is deemed to have taken place at that point in time at which the goods are delivered or services provided, and not when the proceeds of sale are received.
What does incurred mean?
Incurred – goods and services are deemed to have been purchased on the date they are received and not when payment is made (e.g. accrued and prepaid expenses).
What is the matching principle?
The matching principle is an accounting concept that dictates that companies report expenses at the same time as the revenues they are related to.
