Intermediate Accounting ch02.ppt

(g) Second Level: Basic Elements Exercise 2-5: Identify the element or elements associated with items below. (f) Items characterized by future economic benefit. (g) Equals increase in net assets during the year, after adding distributions to owners and subtracting investments by owners. (h) Arises from income 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 income Revenue Expenses Gains Losses (i) Residual interest in the net assets of the enterprise. (j) Increases assets through sale of product. (k) Decreases assets by purchasing the company’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 2-5: 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 income Revenue Expenses Gains Losses Elements Review: Second Level: Basic Elements According to the FASB conceptual framework, an entity’s revenue may result from A decrease in an asset from primary operations. An increase in an asset from incidental transactions. An increase in a liability from incidental transactions. A decrease in a liability from primary operations. LO 5 Define the basic elements of financial statements. LO 5 Illustration 2-7 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.” Economic Entity – company keeps its activity separate from its owners and other businesses. Going Concern - company to last long enough to fulfill objectives and commitments. Monetary Unit - money is the common denominator. Periodicity - co