2009_1 T05 S

2009_1 T05 S - ACCT2101 Financial Reporting Tutorial 5 -...

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ACCT2101 – Financial Reporting Tutorial 5 - Solution 1 TOPIC 5: INCOME STATEMENT 1. What is the difference between income and revenue? Income is a broader concept which includes the components of revenue and gains. Income is defined as “increases in economic benefit during the accounting period in the form of inflows or enhancements of assets or decreases in liabilities that result in increases in equity, other than those relating to contributions from equity participants” Framework:70 The Framework states that “the definition of income encompasses both revenue and gains.” Framework:74 . Revenues are defined as “the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants.” AASB118:7. Revenue arises in the course of the ordinary activities of an entity and is referred to by a variety of different names including sales, fees, interest, dividends, royalties and rent. Gains represent other items that meet the definition of income and may, or may not, arise in the course of the ordinary activities of an entity. Gains represent increases in economic benefits and as such are no different in nature from revenue.( Framework: 75 ) This is a new distinction as a result of adoption of IFRS. 2. DQ 12.4 – What conditions need to be met before income/revenue can be recognised? Income is defined as “Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants.” Framework (Para 70a) . According to the Framework (Para 92-93) income/revenue should be recognised when and only when: i. An increase in future economic benefits related to an increase in an asset or a decrease of a liability has arisen and; ii. the increase in future economic benefits can be measured reliably. 3. Question 12.5- What conditions need to be met before expense/loss can be recognised? Expenses are defined as “Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrence of liabilities that result in decreases in equity, other than those relating to distributions to equity participants” Framework (Para 70b). According to the AASB Framework (Para 94) expense should only be recognised when: i A decrease in future economic benefit related to a decrease in an asset or an increase of a liability has arisen and ii the decrease in future economic benefits can be measured reliably.
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ACCT2101 – Financial Reporting Tutorial 5 - Solution 2 4. What are the different categories of revenue found in AASB118 Revenue ? With reference to AASB118:1 the different categories of revenue are:
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This note was uploaded on 06/06/2009 for the course 2131 FFF taught by Professor Mrhuh during the Three '09 term at Queensland.

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2009_1 T05 S - ACCT2101 Financial Reporting Tutorial 5 -...

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