definitions Flashcards
Financial position
The financial value of an entity at a particular moment in time.
Equity
The residual interest in the assets of the entity after deducting all its liabilities.
Assets
A present economic resource controlled by the entity as a result of past events.
Has the potential to produce economic benefits.
tangible or intangible.
Liabilities
A present obligation of the entity to transfer an economic resource as a result of a past event.
current and non current.
income
is an increase in assets, decrease in liabilities which therefore increases equity.
Expenses
decreases in assets, increases in liabilities, therefore a decrease in equity.
historical cost
Assets: the amount paid or fair value of the consideration given to acquire.
Liabilities: settlement amount (proceeds received in exchange for obligation).
Current cost
Assets: cash or equivalents to acquire same asset currently.
Liabilities: undiscounted cash needed to settle obligation currently
Realisable value
Assets: cash or equivalents that could currently be obtained by selling the assets in an orderly disposal.
Liabilities: cash or equivalents expected to be paid to settle the liability in an ordinary course of business.
Present value
Assets: present discounted value of the future net cash inflows expected to be generated in the normal course of business.
Liabilities: Present discounted value of the future net cash outflows required to settle the liabilities in the normal course of business.
Relevance
predictive value
confirming value
materiality must be taken into account
faithful representation
completeness
neutrality
freedom from error
enhancing qualitative characteristics
comparability
verifiability
timeliness
understandability
accrual
transactions and other events are accounted for when they occur
going concern
financial statements prepared on the basis the entity will still be in business in the foreseeable future
