Abm2 - abm2 PDF

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Malasiqui Catholic School

Fundamentals of ABM 2 Financial Statements are the means by which the information accumulated and processed in financial accounting is periodically communicated to users. -

The end product or main output of the financial accounting process

Users Primary Users – existing and potential investors Other Users – employees, customers, governments and their agencies and the public *presented at least annually Components of financial, statements A complete set of financial statements comprises the following components: 1. Statement of financial position 2. Statement of comprehensive income 3. Statement of changes in equity 4. Statement of cash flows 5. Notes to Financial Statements

Statement of Financial Position - Is a formal statement showing the three elements comprising final position, namely assets, liabilities and equity

ASSETS – resources controlled by the entity as a result of past transactions and events and from which future economic benefits are expected to flow to the entity The essential characteristics of an Asset are: a) The asset is controlled by the entity b) The asset is the result of a past transaction or event c) The asset provides future economic benefits d) The cost of the asset can be measured reliably Classification of assets Current Assets  cash or cash equivalent (unrestricted)  held for trading  expected to realize within 12 months after reporting period  expected to realize the asset or intends to sell or consume it within entity’s normal operating cycle Noncurrent Assets - an entity shall classify all other asset not classified as current as noncurrent - residual definition

LIABILITIES – “present obligations of an entity arising from past transactions or events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits” The essential characteristics of an Asset are:

a) b) c) d)

expects to settle the liability within the entity’s normal operating cycle. Holds the liability primarily for the purpose of trading Libility is due to be settled within twelve months after the reporting period Does not have an unconditional right to defer settlement of the liability for atleast twelve months after the reporting period...