Financial Statements portray the financial effects of transactions and other events by grouping them into broad classes according to their economic characteristics.
These broad classes are termed the elements of financial statements.
The following are the basic accounting elements mentioned in PAS No. 1:
The elements which directly related to the measurement of financial statements are as follows (Statement of Financial Position elements):
- Assets – These are any tangible and intangible property owned by the business organization that has a monetary value.
- Liabilities – These are amounts owed to outside creditors.
- Equity – It is the residual claim against the assets of the business after the total liabilities are deducted.
The elements directly related to the measurement of profit are the following (Income Statement elements):
- Revenues – These are the gross earnings of the business as a result in selling of goods or rendering of services.
- Expenses – These are the costs incurred or consumed in the process of producing revenues. Other items of expenses, costs incurred, and/or losses that are directly related to the principal operations of the business.
Classification of Accounting Elements
Statement of Financial Position elements are classified as Real Accounts
While, Income Statement elements are classified as Nominal Accounts
...read more
Examples of Accounting Elements and their definition
Click each accounting elements to read examples and their definition.
Naming or identifying which account to be used
A bookkeeper must remember that an Account Name or Account Title is the assigned name or title to a group of values in business transactions which have or bears the same / similar nature, function or character pertaining to one item only.
Meaning, a bookkeeper must assign a name or a title to a grouping of values pertaining to one item only.
Say, a coin, a paper money, checks, bank drafts, or money orders are received or paid. These items pertain to one item only and they are described as Cash. So, assign them the account name or title Cash. In other words, identify them as Cash Account. Other practitioners use the account name Cash and Cash Equivalents for Cash Account.
Another example, computers, adding machines, calculators, and filing cabinets pertain to one item only and can be represented as Office Equipment.
This naming process is called identification of accounts...read more
Note: Click the subjects/topics to read the discussion
No comments:
Post a Comment