CFAS CHAPTER 4

61問 • 1年前

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Provide information about economic resources of reporting entity, claims against the entity and changes in the economic resources and claims.

financial statements

Provide financial information about an entitys assets, liabilities, equity, income and expenses useful to users of financial statements.

financial statements

It provide financial information useful to users in: A. Assessing future cash flows to the reporting entity B. Assessing management stewardship of the entitys economic resources

financial statements

Financial information is provided in the following:

statement of financial position income statement statement of cash flows statement of changes in equity notes to financial statements

By recognizing assets, liabilities and equity

statement of financial position

By recognizing income and expenses

income statement

By recognizing cash flows from operating, investing and financing activities

statement of cash flows

By recognizing contributions from equity holders and distributions to equity holders

statement of changes in equity

By recognizing disclosures required by accounting standards

notes to financial statements

Three types of financial statements

consolidated financial statements unconsolidated financial statements combined financial statements

Are the financial statements prepared when the reporting entity comprises BOTH the PARENT and its SUBSIDIARIES

consolidated financial statements

Are the financial statements prepared when the reporting entity is the PARENT ALONE.

unconsolidated financial statements

Are the financial statements from the reporting entity comprises TWO OR MORE ENTITIES that are NOT LINKED by a parent and subsidiary relationship

combined financial statements

Provide information about the assets, liabilities, equity, income and expenses of both the parent and its subsidiaries as a single reporting entity.

consolidated financial statements

Is the entity that exercises control over the subsidiaries

parent

Is useful for existing and potential investors, lenders and other creditors of the parent in their assessment of future net cash flows through the parent.

consolidated financial statements

This is because net cash inflows to the parent include distributions to the parent from its subsidiaries.

consolidated financial statements

Are NOT designed to provide separate information about the assets, liabilities, equity, income and expenses of a PARTICULAR SUBSIDIARY.

consolidated financial statements

I designed to provide information about the parents assets, liabilities, income and expenses and not about those of the subsidiaries.

unconsolidated financial statements

Such information can be useful to the existing and potential investors, landers and other creditors of the parent because a claim against the parent typically does not give the holder of that claim against a subsidiaries.

unconsolidated financial statements

Information provided in these is typically not sufficient to meet the requirement needs of primary users.

unconsolidated financial statements

These cannot serve as substitute for consolidated financial statements.

unconsolidated financial statements

Provide financial information about the assets, liabilities, equity, income and expenses of two or more entities not linked with parent and subsidiary relationship.

combined financial statements

Is an entity that is required or chooses to prepare financial statements.

reporting entity

Can be a single entity or a portion of an entity, or can comprise more than one entity.

reporting entity

A reporting entity is not necessarily a?

legal entity

This can be considered as? A. Individual corporation, partnership or proprietorship B. The parent alone C. The parent and its subsidiaries as single reporting entity D. Two or more entities without parent and subsidiary relationship as a single reporting entity E. A reportable business segment of an entity

reporting entity

Is the period when financial statements are prepared for general purpose financial reporting.

reporting period

Financial statements may be prepared on an?

interim basis

For example, 3 months, 6 months or 9 months

interim basis

These types of financial statements are not required but optional

interim financial statements

Financial statements must be prepared on an?

annual basis or a period of 12 months

To help users of financial statements to identify and assess change in trends, financial statements also provide _____ for at least one preceding reporting period.

comparative information

Financial statements may include information about transactions and other events that occurred ____ if the information is necessary to meet the general objective of financial statements.

after the end of reporting period

Are the basic notions or fundamental premises on which the accounting process is based

accounting assumptions or accounting postulates

Like a building structure that requires a solid foundation to avoid or prevent future collapse and provide room for expansion, and so with accounting.

accounting assumptions or accounting a postulates

Serve as the foundation or bedrock of accounting in order to avoid misunderstanding but rather enhance the understanding and usefulness of the financial statements.

accounting assumptions

The conceptual framework for financial reporting mentions only one assumption.

going concern

Implicit in accounting are the basic assumptions of?

accounting entity time period monetary unit

Means that in the absence of evidence to the contrary, the accounting entities viewed as continuing in operation indefinitely.

going concern or continuity assumption

The financial statements are normally prepared on the assumption that the entity will continue in operations for the foreseeable future.

going concern or continuity assumption

The going concern postulate is the very foundation of the?

cost principle

If there is evidence that the entity would experience large and persistent losses or that the entities operation are to be terminated, ____ assumption is abandoned.

going concern

It is the specific business organization, which may be a proprietorship, partnership or corporation.

accounting entity

Under this assumption, the entity is separate from the owners, managers and employees who constitute the entity.

accounting entity

The reason for the entity assumption is to have a _____ of financial statements

fair presentation

The personal transactions of the owner shall not be allowed to distort the financial statements of the entity.

accounting entity

For example, the cash invested by the proprietor is treated as an asset of the proprietorship.

accounting entity

The parent and subsidiary are a _____ entity

single economic entity

A completely accurate report on the financial position and performance of an entity cannot be obtained until the entity is finally dissolved and liquidated.

time period

Users of financial information need timely information for making an economic decision.

time period

Requires that the indefinite life of an entity is subdivided into accounting periods which are usually of equal length for the purpose of preparing financial reports and financial position, performance and cash flows.

time period assumption

Is 1 year or a period of 12 months

accounting period or fiscal period

Is traditionally the accounting period because usually it is after one year that the government reports are required.

1 year period

Is a 12 month period that ends on DECEMBER 31.

calendar year

Is a 12-month-old that ends on any month when the business is at the lowest or experiencing slack season.

natural business year

The monetary unit assumption has two aspects:

quantifiability and stability of the peso

Means that the asset, liabilities, equity, income and expenses should be stated in terms of a unit of measure which is the peso in the Philippines.

quantifiability aspect

Means that the purchasing power of the peso is stable or constant and that its instability is insignificant and therefore may be ignored.

stability of the peso

Is actually an amplification of the going concern assumption so much so that adjustments are unnecessary to reflect any changes in purchasing power.

stable peso postulate

The accounting function is to account for nominal precious only and not for constant pesos or changes in purchasing power.

stable peso postulate

Business Finance

Sab Sescon · 46問 · 2年前

Business Finance