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7 Cards in this Set
- Front
- Back
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What are the objectives of financial reporting?
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1. Provide info that is useful to existing and potential investors, lenders and other creditors in making decisions
2. Info about a reporting entity's economic resources and claims against the entity (Financial Position B/S) 3. Changes in economic resources and claims 4. Financial performance reflected by accrual accounting 5. Financial performance reflected by past cash flows (c/f) 6. Changes in economic resources and claims, NOT resulting from financial performance (ex: issuing stock) |
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What is the pervasive constraint that overrides the usefulness of info?
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cost/benefit - cost of obtaining and presenting info shouldn't exceed the benefit.
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Elements of Financial Statements Includes:
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-Statements of Financial Position (b/s)
-Statements of earnings and comprehensive income (I/S) -Statement of Cash Flows Statement of Changes in Owners' Equity |
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10 Key elements that make the financial statements useful
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1 Assets
2 Liabilities 3 Equity (net assets) 4 Investments by owners 5 Distributions to owners 6 Comprehensive Income 7 Revenue 8 Expense 9 Gains 10 Losses |
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Accounting rules and concepts that go along with the 10 key elements
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-consistency
-conservatism -cost/benefit -matching -allocation -full disclosure -recognition -realization |
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When to recognize financial statement element?
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-Meets the definition of an element (asset, liability)
-element is capable of being measured in monetary terms -Item is relevant and faithful representation |
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How to measure in monetary terms
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-Historical cost - amount paid (PPE)
-Replacement cost -Fair Market Value -Net realizable value- Amount expected to be converted (for a/r) -Net Present Value - discounted cash flows (notes/ receivables , bonds/payable, leases) |
