Framework for FS Presentation

 Income
o Direct effect with equity
 Expenses
o Indirect effect with equity
 Probable
o More than 50% chance
o Versus possible- 50-50 chance
o Versus remote- very little chance of probability that there will be economic benefit for
company
 Historical Cost
o Original amount of accounting item
 Current Cost/ Fair Value/ Market Value
o Value of accounting item at present
o Prevailing market price
 Realizable Value
o Value of accounting item after deducting the expenses used for an asset for it to be sold
or a liability to be paid
 Present Value
o Amount of asset or liability in the future
 2 Concepts of Capital
o Financial Capital
 Capital is synonymous to the net assets of a company
 No required measurement basis
o Physical Capital
 Synonymous to a company’s operating capacity
 Required measurement basis: Fair value
 Machinery, buildings
 Capital Maintenance
o Way to determine how much should be considered as profit of company
o 2 concepts:
 Financial Capital Maintenance
 Physical Capital Maintenance

Accounting for Cash

 Cash from bankrupt banks/ closed banks- restricted cash and should be classified as receivable
 Examples of non-current liabilities- bonds payable, loans payable
 When determining whether current or non-current asset, look on the intention not the date
where it will be used
 Cash items:
o Cash on hand
 Bills and coins
 Checks- date on check: when is check available for encashment at bank
 Customer
 Traveler
  Manager
 Cashier
 Company’s undelivered check
 Company’s postdated check
 Company’s stale checks
 Bank drafts
 Postal money orders
o Cash in bank
 Savings account
 Checking account
 Bank accounts in foreign currency
 Use exchange rate on balance sheet date
 Unrestricted compensating balance
o Working fund
 Petty cash
 Change
 Payroll
 Dividend
 Tax
 Interest