Investing and Financing Decisions
and the Balance Sheet
Objective of External Financial Reporting
To provide useful economic information to external users
for decision making and for assessing future cash flows.
Objective of External Financial Reporting
To provide useful economic information to external users
for decision making and for assessing future cash flows.
Asset: economic resource with
probable future benefit.
Liability: probable future sacrifices of
economic resources.
Stockholders’ Equity: financing
provided by owners and operations.
Revenue: increase in assets or
settlement of liabilities from ongoing
operations.
Expense: decrease in assets or
increase in liabilities from ongoing
operations.
Gain: increase in assets or settlement
of liabilities from peripheral
transactions.
Loss: decrease in assets or
increase in liabilities from peripheral
transactions.
