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1. Need for GAAP) Some argue that having various
organizations establish accounting principles is wasteful and
inefficient. Rather than mandating accounting rules, each
company could voluntarily disclose the type of information it
considered important. In addition, if an investor wants
additional information, the investor could contact the company
and pay to receive the additional information desired.
2.
E2.5 (LO 2) (Elements of Financial Statements) Ten interrelated
elements that are most directly related to measuring the
performance and financial status of an enterprise are provided
below. Assets Distributions to owners Expenses Liabilities
Comprehensive income Gains Equity Revenues Losses
Investments by owners Instructions Identify the element or
elements associated with the 12 items below.
a. Arises from peripheral or incidental transactions.
b. Obligation to transfer resources arising from a past
transaction.
c. Increases ownership interest.
d. Declares and pays cash dividends to owners.
e. Increases in net assets in a period from nonowner sources.
f. Items characterized by service potential or future economic
benefit.
g. Equals increase in assets less liabilities during the year,
after adding distributions to owners and subtracting investments
by owners.
h. Arises from income statement activities that constitute the
entity’s ongoing major or central operations.
i. Residual interest in the assets of the enterprise after
deducting its liabilities.
j. Increases assets during a period through sale of product.
k. Decreases assets during the period by purchasing the
company’s own stock.
l. Includes all changes in equity during the period, except
those resulting from investments by owners and distributions to
owners.

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  • 1. 1. Need for GAAP) Some argue that having various organizations establish accounting principles is wasteful and inefficient. Rather than mandating accounting rules, each company could voluntarily disclose the type of information it considered important. In addition, if an investor wants additional information, the investor could contact the company and pay to receive the additional information desired. 2. E2.5 (LO 2) (Elements of Financial Statements) Ten interrelated elements that are most directly related to measuring the performance and financial status of an enterprise are provided below. Assets Distributions to owners Expenses Liabilities Comprehensive income Gains Equity Revenues Losses Investments by owners Instructions Identify the element or elements associated with the 12 items below. a. Arises from peripheral or incidental transactions. b. Obligation to transfer resources arising from a past transaction. c. Increases ownership interest. d. Declares and pays cash dividends to owners. e. Increases in net assets in a period from nonowner sources. f. Items characterized by service potential or future economic benefit. g. Equals increase in assets less liabilities during the year, after adding distributions to owners and subtracting investments by owners.
  • 2. h. Arises from income statement activities that constitute the entity’s ongoing major or central operations. i. Residual interest in the assets of the enterprise after deducting its liabilities. j. Increases assets during a period through sale of product. k. Decreases assets during the period by purchasing the company’s own stock. l. Includes all changes in equity during the period, except those resulting from investments by owners and distributions to owners.