FinACC 188 notes

FINANCIAL ACCOUNTING 188
CHAPTER 1, 2 & 3 :


ENTITY CONCEPS ; BUSINESS & OWNERS SEPARATE I.T.O ACCOUNTING RECORDS
FINANCIAL POSITION = EQUITY ( WHAT THE OWNER CONTRIBUTED + PROFIT OR
LOSS )


DEBIT = CREDIT + CREDIT

ASSETS = EQUITY + LIABILITY
EQUITY = ASSETS – LIABILITY


FINANCIAL PERIOD = 1 YEAR / 12 MONTHS
( 1ST 11 CHAPTERS = SOLE PROPRIOTER )



ASSETS & EQUITY
. DOES IT MEET THE RECONITION & DEFINITION CRIERIA ?
. NET ASSET POSITION = STATEMENT OF FINANCIAL POSITION


• * Study Chapter 2.2.4 – 2.2.6 in the prescribed book


OWNERS EQUITY = CAPITAL



ELEMENTS OF FINANCIAL STATEMENTS :
. ASSET
. LIABILITY
. EQUITY
. INCOME
. EXPENCE


[ TANGIBLE ASSET : ASSET YOU CAN SEE ]
[ INTANGIBLE ASSET : ASSETS YOU CAN’T SEE ]

Extended equation :

, Basic equation A=L+C (C=capital=equity=E)
EQUITY = Contributions (Ci) – Drawings (D) + Revenue (I) + Gains (Po) –
Current expenses (E) – Losses (Lo)
Therefore: A = L +(Ci – D + I + Po – E – Lo)
Therefore: A + D + E + Lo = L + Ci + I + Po




INCREASE DEBIT INCREASE
CREDIT
DECREASE CREDIT
DECREASE DEBIT


Recognition of assets :

◦ Asset recognition is appropriate if it results in RELEVANT AND
FAITHFULLY REPRESENTED information.


Recognition of liabilities :
◦ Liabilities recognition is appropriate if it results in RELEVANT AND
FAITHFULLY REPRESENTED information.



Recognition of income/gains and expenses/losses :
The financial statements / recognition of incomes and expenses are
linked because the recognition of one item (or a change in its carrying
amount) requires the recognition or derecognition of one or more other
items (or changes in the carrying amount of one or more other items).




For example:
(a) the recognition of INCOME occurs at the same time as:
(i) the initial recognition of an asset, or an increase in the carrying
amount of an asset; or