【文章內(nèi)容簡介】 ing Basic Elements 231 ? Investment by owners ? Distribution to owners ? Comprehensive ine ? Revenue ? Expenses ? Gains ? Losses Second Level: Basic Elements Concepts Statement No. 6 defines ten interrelated elements that relate to measuring the performance and financial status of a business enterprise. ? Assets ? Liabilities ? Equity “Moment in Time” “Period of Time” LO 5 Define the basic elements of financial statements. 232 Assets Liabilities Equity Investment by owners Distribution to owners Comprehensive ine Revenue Expenses Gains Losses Second Level: Basic Elements Exercise 25: Identify the element or elements associated with items below. (a) Arises from peripheral or incidental transactions. (b) Obligation to transfer resources arising from a past transaction. (c) Increases ownership interest. (d) Declares and pays cash dividends to owners. (e) Increases in assets in a period from nonowner sources. (a) Elements (b) (c) (d) (c) (a) (e) LO 5 233 (g) Second Level: Basic Elements Exercise 25: Identify the element or elements associated with items below. (f) Items characterized by future economic benefit. (g) Equals increase in assets during the year, after adding distributions to owners and subtracting investments by owners. (h) Arises from ine statement activities that constitute the entity’s ongoing major or central operations. LO 5 Elements (f) (h) (h) Assets Liabilities Equity Investment by owners Distribution to owners Comprehensive ine Revenue Expenses Gains Losses 234 (i) Residual interest in the assets of the enterprise. (j) Increases assets through sale of product. (k) Decreases assets by purchasing the pany’s own stock. (l) Changes in equity during the period, except those from investments by owners and distributions to owners. Second Level: Basic Elements Exercise 25: Identify the element or elements associated with items below. LO 5 (i) (j) (k) (l) Assets Liabilities Equity Investment by owners Distribution to owners Comprehensive ine Revenue Expenses Gains Losses Elements 235 Review: Second Level: Basic Elements According to the FASB conceptual framework, an entity’s revenue may result from a. A decrease in an asset from primary operations. b. An increase in an asset from incidental transactions. c. An increase in a liability from incidental transactions. d. A decrease in a liability from primary operations. LO 5 Define the basic elements of financial statements. 236 LO 5 Illustration 27 Conceptual Framework for Financial Reporting Third Level: Recognition and Measurement The FASB sets forth most of these concepts in its Statement of Financial Accounting Concepts No. 5, “Recognition and Measurement in Financial Statements of Business Enterprises.” 237 Economic Entity – pany keeps its activity separate from its owners and other businesses. Going Concern pany to last long enough to fulfill objectives and mitments. Moary Unit money is the mon denominator. Periodicity pany can divide its economic activities into time periods. Third Level: Basic Assumptions LO 6 Describe the basic assumptions of accounting. 238 Third Level: Assumptions LO 6 Describe the basic assumptions of accounting. Brief Exercise 27: Identify which basic assumption of accounting is best described in each item below. (a) The economic activities of KC Corporation are divided into 12month periods for the purpose of issuing annual reports. (b) Solectron Corporation, Inc. does not adjust amounts in its financial statements for the effects of inflation. (c) Walgreen Co. reports current and noncurrent classifications in its balance sheet. (d) The economic activities of General Electric and its subsidiaries are merged for accounting and reporting purposes. Periodicity Going Concern Moary Unit Economic Entity 239 Measurement Principle – The most monly used measurements are based on historical cost and fair value. Issues: ? Historical cost provides a reliable benchmark for measuring historical trend