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5.Define the elements of financial statements identified in SFAC No. 3 and SFAC No. 6.ANSWER:Assetsare probable future economic benefits obtained or controlled by a particular entity as resultof past transactions or events.Accounting Theory: 8theditionPage 9 of 11
Chapter 7—THE FASB'S CONCEPTUAL FRAMEWORKLiabilitiesare 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.Equity (or net assets)is the residual interest in the assets of an entity that remains after deducting its liabilities.Investments by ownersare increases in equity resulting from transfers to it from other entities of something valuable to obtain or increase ownership interests (equity) in it.Distributions to ownersare decreases in equity resulting from transferring assets, rendering services, or incurring liabilities by the enterprise to owners.Comprehensive incomeis the change in equity during a period from transactions and other eventsand circumstance from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.Revenuesare inflows or other enhancements of assets or settlements of its liabilities from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.Expensesare outflows or other depletion of assets or incurrences of liabilities from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major or central operations.Gainsare increases in equity from peripheral or incidental transactions of an entity and form all other transactions and other event and circumstance affecting the entity except those that result from revenues or investment by owners.Lossesare decreases in equity from peripheral or incidental transactions of an entity and from all other transaction and other events and circumstance affecting the entity except those that result from expenses or distribution to owners.6.Discuss the criticisms that of SFAC No. 6?