Financial Statements are described as the language of business. These statements tell the condition and performance of a business historically, currently and prospectively. The main objective is to provide information about financial position, financial performance and cash flows of an entity used in making economic decisions. ELEMENTS OF FINANCIAL STATEMENTS
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. Elements of the financial statements include assets, liabilities, equity, income and expenses. The first three elements relate to the statement of financial position whereas the latter two relate to the income statement. For example, assets and liabilities may be classified by their nature or function in the business of the enterprise in order to display information in the manner most useful to users for purpose of making economic decisions. FINANCIAL POSITION
The elements directly related to the measurement of financial position are assets, liabilities and equity. These are defined as follows: (a)
Assets are the resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity (IASB Framework). In simple words, asset is something which a business owns or controls to benefit from its use in some way. It may be something which directly generates revenue for the entity (e.g. machine, inventory) or it may be something which supports the primary operations of the organization (e.g. office building). Recognition of assets as covered in various IFRSs like IAS 16 Property, Plant and Equipment, IAS 17 Leases, IAS 38 Intangible Assets in general and concept of assets enshrined in any standard should follow the definition state in the framework. FEATURES OF AN ASSET: i) The future economic benefit embodied in an...
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