Video Transcript: The Basic Elements of Financial Statements

Hello and welcome back now we're going to talk about the basic elements of  financial statements. Thus far, we have discussed objectives of financial  reporting and qualitative characteristics of accounting information. A third  important task in developing a conceptual framework for any discipline is  identified and defining its basic elements. The has the FASB identified and  defined the basic elements of financial statements in concept statement number  three, later, concept number six, revise some of the definitions. We define most  of the terms earlier in this text in a less technical way than more technical  definitions follow, liabilities are probable future sacrifices of economic benefits  arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events,  assets are probable future economic benefits obtained or controlled by particular entity as a result of past transactions or events. Equity or net asset is the  residual interest in the assets of an entity that remains after deducting its  liabilities in a business enterprise, the equity is the ownership interest in a not for profit organization which has no ownership interest in the same sense as the  business enterprise. Net Assets is divided into three classes based on the  presence or absence of donor imposed restrictions, permanently restricted or  temporary. Temporarily restricted and unrestricted net assets. Comprehensive  income is the change in the equity of a business enterprise during a period from  transactions and other events and circumstances from non owner resources. It  includes all changes in equity during a period, except those resulting from  investments by owners and distributions to owners. Revenues are inflows or  other enhancements of assets of any entity or settlements of its liabilities from  delivering or producing goods, from rendering services or other activities that  constitute the entities, ongoing major or central operations, expenses or  outflows or other using up of assets or incurrences of liability from delivering or  producing goods, rendering services or carrying out other activities that  constitute the entities ongoing major or central operation gains are increases in  equity from peripheral or incidental transactions of an entity, and from all other  transactions and other events and circumstances affecting The entity, except  those that result from revenues or investments by owners. Losses are  decreases in equity from peripheral or incidental transactions of an entity and  from all other transactions and other events and circumstances affecting the  entity, except those that result from expenses or distributions to owners,  investments, investments by owners are increases in equity of a particular  business enterprise resulting from transfers to it from other entities of something valuable to obtain or increase ownership interests. Assets are most commonly  received as investments by owners, but that which is received may also include  services or satisfaction or conversion of liabilities of the enterprise. Distributions  to owners are decreases in equity of a particular business enterprise, resulting  from transferring assets, rendering services or incurring liabilities by the 

enterprise to owners. Distributions to owners decrease ownership interest in an  enterprise in December 1984 the FASB issued statement of financial accounting concepts number five, and it states recognition and measurement in financial  statements of business enterprises, describing recognition criteria and providing  guidance for the timing and nature of information, including the financial  statements the recognition criteria. Be established in the statement are fairly  consistent with those used in current practice. The statement indicates,  however, that when information more useful than currently reported, information  is available at a reasonable cost, it should be included in the financial statement.