CONCEPTUAL FRAMEWORK Elements Of Financial Statements Objectives • To identify the elements directly related to the measurement of Financial Position and Financial Performance 青春 • To understand the concept of Asset, Liability and Equity • To understand the concept of Income and Expenses Elements Of Financial Statements FINANCIAL POSITION ASSETS LIABILITIES EQUITY FINANCIAL PERFORMANCE INCOME EXPENSES STATEMENT OF CHANGES IN EQUITY Conceptual Framework identifies no elements that are unique to this Financial Statement. FINANCIAL POSITION The statement of financial position is used to report the assets, liabilities, and equity of a business on a given date – a summary, or snapshot, of its overall value at a certain point in time. ASSETS Under the Revised Conceptual Framework, an asset is defined as a present economic resource controlled by the entity as a result of past events. RIGHTS A right can be defined as an entitlement to have or do something. 1. Rights that correspond to an obligation of another entity. 2. Rights that do not correspond to an obligation of another entity. 3. Rights established by contract or legislation. LIABILITY Under the Revised Conceptual Framework, a liability is defined as a present obligation of an entity to transfer an economic resource as a result of past events. OBLIGATIONS An Obligation is a duty or responsibility that an entity has no practical ability to avoid. Obligations can either be legal or constructive. EQUITY Equity is the residual interest in the assets of the entity after deducting all of the liabilities. FINANCIAL PERFORMANCE The Income Statement or Statement of Profit and Loss is the primary source of information about an entity’s financial performance. INCOME Income is defined as an increase in assets or decrease in liabilities that result in increases in equity, other than those relating to contributions from equity holders. REVENUE AND GAINS • Revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business. • Gains is any economic benefit that is outside the normal operations of a business, typically from the increased value of an asset. EXPENSE Expense is defined as decreases in assets or increases in liabilities that result in decreases in equity, other than those relating to distribution to equity holders. EXPENSES AND LOSSES • Expenses is the operational cost that is paid to earn business revenues. It means the outflow of cash in return for goods or services. • Losses is a decrease in net income that is outside the normal operations of the business. THANK YOU!
