Financial Statements and Reporting Key Terms

Vocabulary flashcards generated from financial statement presentation and accounting notes.

Financial Statement

A structured financial representation of the financial position and financial performance of an entity.

Statement of Financial Position

A financial statement component comprising assets, liabilities, and equity, which pertains to liquidity, solvency, and the need for additional financing.

Statement of Financial Performance

A financial statement component comprising revenue, expenses, and net income or loss, portraying the result of operations through efficient and effective resource use.

Statement of Cash Flows

A statement showing cash receipts and cash payments arising from operating, investing, and financing activities.

Financial Reporting

The provision of information about an entity to external users that is useful for making economic decisions and assessing management effectiveness.

Target Users

Existing and potential investors, lenders, and other creditors who have the most critical and immediate need for financial information.

Board of Directors

The governing body responsible for reviewing and authorizing financial statements before they are submitted to shareholders.

Management

The body accountable for the safekeeping of entity resources and their proper, efficient, and profitable use.

Shareholders

Primary stakeholders who assess how effectively management fulfilled its role concerning decisions on investment and reappointment or replacement.

Fair Presentation

The presentation of financial statements fairly and in accordance with PFRS, which represent GAAP.

Consistency Presentation

The requirement that the presentation and classification of items in financial statements shall be applied on a uniform basis from period to period.

Materiality

The principle that information is material if its omission, misstatement, or obscuring could reasonably be expected to influence economic decisions of primary users.

Accrual Basis of Accounting

An accounting basis where assets are recognized when receivable, liabilities when payable, income when earned regardless of receipt, and expenses when incurred regardless of payment.

Going Concern

The continuity assumption that an entity is viewed as continuing operation indefinitely in the absence of evidence to the contrary.

Asset

A present economic resource controlled by the entity as a result of past events that produces economic benefits.

Operating Cycle

The time between the acquisition of an asset for processing and its realization in cash or cash equivalents.

Property, Plant and Equipment

Tangible assets used in business for production, supply of goods and services, rental, or administrative purposes, expected to be used over more than 1 year.

Intangible Assets

Non-monetary assets without physical substance that are expected to provide future economic benefits and are identifiable through separability or legal rights.

Liability

A present obligation of the entity to transfer an economic resource as a result of past events.

Working Capital

The net operational capital calculated as $\text{Current Assets} - \text{Current Liabilities}$.

Working Capital Ratio

The liquidity ratio calculated as $\frac{\text{Current Assets}}{\text{Current Liabilities}}$.

Estimated Liability

An obligation existing at the end of the reporting period for which the exact amount is not definite.

Contingent Liability

A possible obligation arising from past events whose existence will be confirmed only by the occurrence or nonoccurrence of uncertain future events.

Contingent Asset

A possible asset arising from unplanned or unexpected past events whose existence will be confirmed by uncertain future events.

Shareholders' Equity

The residual interest of owners in the assets of the entity after deducting all its liabilities.

Share Capital

The portion of equity paid in total par or stated value of shares issued.

Retained Earnings

The cumulative balance of periodic income or loss, dividend distributions, prior errors, changes in accounting policies, and other adjustments.

Unappropriated Retained Earnings

The free portion of retained earnings that can be declared as dividends (distributable equity).

Appropriated Retained Earnings

The restricted portion of retained earnings that is not available for dividend declaration.

Deficit

A debit balance in retained earnings that acts as a deduction from shareholders' equity.

Revaluation Surplus

The excess of sound value over carrying amount of an asset.

Treasury Shares

Shares that have been issued and fully paid but reacquired by the entity and not canceled.

Related Party

A party that has the ability to control, exercise significant influence over another party, or share joint control over an entity.

Control

Power over an investee or power to govern its financial and operating policies, generally evidenced by ownership of more than half of voting power.

Significant Influence

The power to participate in financial and operating policy decisions without control, usually gained by holding $20\text{\%}$ or more voting power.

Related Party Transaction

A transfer of resources, services, or obligations between related parties, regardless of whether a price is charged.

Adjusting Events

Events after the reporting period that provide evidence of conditions that existed at the end of the reporting period.

Nonadjusting Events

Events after the reporting period that are indicative of conditions that arose after the end of the reporting period.

Profitability

The measured level of income earned through effective and efficient utilization of resources, useful in predicting cash flow generation from existing resources.

Functional Presentation

An income statement method (COGS method) that classifies expenses according to their function as COGS, distribution costs, or administrative activities.

Natural Presentation

An income statement method (Expense method) where expenses are aggregated according to their nature and not allocated among various functions.

Comprehensive Income

The change in equity from transactions and other events, other than transactions with owners in their capacity as owners.

Other Comprehensive Income

Items of income and expense (including reclassification adjustments) that are not recognized in profit or loss as required or permitted by PFRS.

Distribution Costs

Expenses directly related to selling, advertising, and delivery of goods.

Administrative Expenses

All operating expenses not related to selling and COGS, including office salaries, general executive expenses, doubtful accounts, and office building depreciation.