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    AccountingT1

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    ramodenito

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    AccountingT1

    Uploaded by

    ramodenito
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    2 views5 pages

    AccountingT1

    Uploaded by

    ramodenito

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    © All Rights Reserved
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    You are on page 1of 5

    Financial Accounting Chapter 1

    The Accounting Cycle and General Overview


    Resumen:

    Balance Sheet
    2. Income Statement
    Accounting as a process
    The accounting process includes the identification, recognition, measurement, presentation and
    disclosure of economic events to enable users of information to make timely and appropriate
    decisions

    Recognition (of an asset, liability, expense or income) involves deciding whether and when to
    recognise (include) an item in the financial statements.
    The recognition decision in the financial statements involves determining whether the main features
    of financial reporting are met (relevance and faithful representation)
    • Relevance: element meets the definition of an element, and the probability of economic benefits
    is not low.
    • Faithful representation: measurement uncertainty not very high and all other related elements
    are recognized
    Measurement is the process of quantification of the amount by which elements are expressed in the
    financial statements. Therefore, the carrying amount or book value of assets and liabilities that form
    part of the balance sheet is determined
    Measurement is a continuous process from recognition to derecognition.

    In measurement decisions we may use two different bases:


    -Historical cost: Measurement using information derived from the price of the transaction or other
    event that gave rise to them.
    -Asset: Value of the consideration paid to acquire or create the asset plus transaction costs at
    the time of the resource's control
    -Liability: Value of the consideration received to incur or take on the liability minus transaction
    costs
    -Current value (Amortised cost): Measurement using information that is updated to reflect
    conditions at the measurement date (Fair value, Value in use, Fulfilment value and Current cost)
    -Asset: Present value of future cash flows from the asset, discounted at a rate determined at
    initial recognition
    -Liability: Present value of future cash flows that will arise in fulfilling the liability, discounted at
    a rate determined at initial recognition
    Historical cost and amortised cost are updated over time (subsequent measurement):
    ▪ Assets: depreciation, impairment, collections and/or accumulated interest
    ▪ Liabilities: payments, accumulated interest and/or onerous liabilities

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