Accounting Standards - Conceptual Framework for Financial Statements

ACCOUNTING STANDARDS 1
ACCOUNTING STANDARDS

ACCOUNTING STANDARDS 2
Contents
Question 1:.................................................................................................................................3
Question 2:.................................................................................................................................4
Question 3:.................................................................................................................................6
Question 4:.................................................................................................................................7
References:.................................................................................................................................8

ACCOUNTING STANDARDS 3
Question 1:
As per the conceptual framework laid down for the financial statements, an asset is
something which entails in the future economic benefits for the company as the result of the
transactions or the past events. The main criteria for the recognition of an asset is recognised
in the financial statements only when there is a probability that it would entail in the future
economic benefits for the company and that asset possess some cost or any such other value
that is capable of being measured reliably.
As per the conceptual framework laid down for the financial statements, a liability are the
sacrifices that the company in the future which is the result of all of the transactions or the
events that have taken place in the past. The criteria for the recognition of these liabilities is
only when it is quiet probable that the future sacrifices of the economic benefits that entail to
the company would be required and when the amounts are capable of being measured with
utmost reliability.
As per the conceptual framework laid down for the financial statement, equity is the residual
amount of the interest in the assets of the company after all of the liabilities have been
deducted from the amounts of the assets.
Revenues are the inflow of cash that is the result of the business operations which entail due
to an increase in the amounts of assets or reduction in the amounts of the liabilities of the
company, other than the ones which relates with the contributions done by the owners which
would result in an increase in the amount of equity during the period of reporting. A revenue
shall only be recorded of it is probable that there would be an inflow of cash and the same is
capable of measured with reliability.
An expense is something which is again incurred by the company during the ordinary course
of the business (AASB, 2017).