Alexa Toni Mari M.

De Vera March 12,2021

1A9 CFAS

Assessment Seatwork #2

1. Enumerate the components of a complete set of financial statements. Discuss

the information contained in each statement.

• Statement of Financial Position is also known as “balance sheet”. It Includes the overall
Asset, Liabilities, and Equity positions of the entity. This shows the internal and
external users the financial condition of the business at a given date, usually at the end
of an accounting period. It shows the accounting principles and the different guideline
such as the cost and matching principle.
• Statement of Comprehensive Income also known as “Income Statement”, Included
here is the result of the operation of the entity. These are mainly represented by
income/profit/gain and expenses/losses. This is the statement of profit and loss and
the financial performance of the business. It also shows the summarize results of the
business. This report whether the business will achieve or not the primary objective or
earning an income.
• Statement of Changes in Equity is the itemize movement of the entity's equity. This
opens with the owner the capital balance at the beginning period. Prepared at the end
of the specific accounting period. This shows an entity’s capital, losses, retained
earnings, and the ending balance of the equity.
• Statement of Cashflows is the detailed movement of entity's cash. This involve the
inflow and outflow of cash and cash equivalents in the entire accounting period. This
helps in assessing the ability of entity to remain solvent in order to show the returns to
the creditors and inventors.
• Notes to the Financial Statement is an entity’s activities that cannot be shown in the
face of financial statements. This is the summary of the accounting policies and other
information. This also provide the disclosure by an accountant to give context and help
people to understand the financial report a lot easier.

2. Discuss in what ways the financial statements are fundamentally related.

The different concepts of financial statements are fundamentally related because some
aspects of the reports are used in each other. For example, Net income which is profit before
tax less tax expense is connected on all three financial statements. Net income is located at
the bottom of the income statement and directly at the top of the cash flow statement followed
by cash from operations. On the balance sheet, net income feeds into retained earnings. It is
interrelated because the different account name appears somehow in the same statement like
the purchase and sale appears on both the statement of financial position and in the statement
of the comprehensive income.

3. Discuss the hierarchy of the bases for the formulation of accounting policies.

First is to apply a standard from IFRS if it specifically relates to the transaction, other event,
or condition. Second is to consider the applicability of the definitions, recognition criteria, and
measurement concepts in the IASB Framework. Third is to consider the most recent
pronouncements of other standard-setting bodies to the extent they do not conflict with the
IFRS or the IASB Framework. Fourth is to apply the requirements in IFRS dealing with similar
and related issues. In the Philippines it is a requirement of the Philippine Financial Reporting
Standards (PFRS) to apply it in every transaction.
 4. How does the financial information presented in the financial statements
achieve the objective of comparability?

In a sense, it will allow the financial statements of the specific entity to be compare to that of
multiple organizations. This is a fundamental requirement of financial reporting that is needed
by the users of financial statements. An entity in a financial information must impart in the
financial statements in a specific period in order to achieve the objective of the comparability.
An entity may show relative transactions for periods sooner than the first-time frame given that
such parts of fiscal reports introduced are in consistent with IFRS. On the off chance that is
the situation, the entity will incorporate related in the note data for those extra parts of financial
statements.
5. How shall a reporting entity achieve fairness in the presentation of financial
statements?

I shall achieve fairness by faithfully representing the effects of transactions, other events, and
conditions in accordance with the definitions and recognition criteria for assets, liabilities,
income and expenses set out in the Framework. The financial information ought not to be
misshaped in any way possible. In order to guarantee a target financial report. It must be
careful in adjusting to the GAA and the standards in introducing fiscal reports. A data is
introduced in a financial statement that might considered drawback for a group and ought to
be given impartiality without predisposition towards the customers of the said data.

6. How does the application of the going concern assumption affect the choice of
the measurement basis of financial statement elements?

It affects it in a sense that companies that are a going concern may defer reporting long-term
assets at current value or liquidating value, but rather at cost. The IAS said that if the entity
will remain it should be on going concern unless there will be a liquidation. The income and
expenses should be recorded when it Is earned or incurred because of the accrual of
accounting and regardless when it is paid. In terms of liquidation, the measurement depends
on the amount of the assets that is being sold.

7. Under what circumstance should the management consider changing the

presentation of its financial statements?

An entity changes the presentation of its financial statements only if the changed presentation
provides information that is reliable and more relevant to users of the financial statements and
the revised structure is likely to continue, so that comparability over time is not impaired. It is
suggested that an entity should be in a financial statement and as its order of things is from
time to time as the presentation is changes it will be more useful and the information is more
relevance. It may occur to the criteria in an application of the policies that will show the financial
statements on how it is reliable to the direct and indirect users.

8. What information must be displayed in each financial statement component for

its clear identification?

It shall include the following :(1) balance sheets that have the assets, liabilities, and equity of
the entire accounting period; (2) income statements display the income and expenses along
with its profit and loss in the entire accounting period.; (3) cash flow statements show the
information about the outflow and inflow of cash and cash equivalents; and (4) statements of
shareholders' equity show the information about the entity and the loss and profit. (5) notes of
financial statements show how it distributed to the owner. Balance sheets show what a
company owns and what it owes at a fixed point in time. Income statements show how much
money a company made and spent over a period of time.