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homework 4 - Tyler Testman Acct 3110 Homework 4 Question 1...

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Tyler Testman Acct 3110 10/26/14 Homework 4 Question 1: a. Elements of financial statements are the building blocks with which financial statements are constructed—the classes of items that financial statements comprise. The items in financial statements represent in words and numbers certain entity resources, claims to those resources, and the effects of transactions and other events and circumstances that result in changes in those resources and claims. b. There are five types of elements of financial statements. These are: Assets, Liabilities, Equity, Income, and Expenses. c. The Statement provides ten elements defined: 1. Assets - are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. 2. 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. 3. Equity - or net assets 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 a business enterprise, net assets is divided into three classes based on the presence or absence of donor-imposed restrictions— permanently restricted, temporarily restricted, and unrestricted net assets. 4. 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 (or equity) in it. Assets are most commonly received as investments by owners, but that which is received
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