PROOF

Abstract

This resource builds on the prior examples and introduces the notion of noncore dimensions. Further, this is an excellent teaching tool and software testing tool.

1. Introduction

This resource is designed to look similar to a financial statement; but is more about understanding the logical patterns that exist within the information contained within a financial report.

This is an excellent teaching tool and software testing resource.

1.1 Elements

The following provides formal definitions of the high-level elements of a financial statement. These elements are informally defined by common practice. [FINANCIAL-STATEMENT].

Assets

Assets are probable future sacrifices of econmic 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.

DEBIT, as of point in time

Liabilities

Liabilities are 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.

CREDIT, as of point in time

Equity

Equity or net assets is the residual interest in the assets of an entity that remains after deducting its liabilities. In a business enterprise, the equity is the ownership interest. In a not-for-profit organization, which has no ownership interest in the same sense as a business enterprise, net assets is divided into three classes based on the presence or absense of donor-imposed restrictions: permanentaly restricted, temporarily restricted, and unrestricted net assets.

CREDIT, as of point in time

Comprehensive Income

Comprehensive income is the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

CREDIT, for period of time

Investments by Owners

Investments by owners are increases in equity of a particular business enterprise resunting from transfers to it from other entities of something valuable to obtain or increase ownership interests (or equity) in it. Assets are most commonly recieved as investments by owners, but that which is received may also include services or satisfaction or conversion of liabilities of the enterprise.

DEBIT, for period of time

Distributions to Owners

Distributions to owners are decreases in equity of a particular business enterprise resulting from transferring assets, rendering services, or incurring liabilities by the enterprise to owners. Distributions to owners decrease ownership interest (or equity) in an enterprise.

CREDIT, for period of time

Revenues

Revenues are inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or centeral operations.

CREDIT, for period of time

Expenses

Expenses are outflows or other using up of assets or incurrences of liabilities (or a combination of both) from delivering of producing goods, rendering of services, or carrying out of activities that constitute the entity's ongoing major or central operations.

DEBIT, for period of time

Gains

Gains are increases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity except those that result from revenues or investments by owners.

CREDIT, for period of time

Losses

Losses are decreases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity except those that result from expenses or distributions of services.

DEBIT, for period of time

Other Comprehensive Income

Other comprehensive income (OCI) includes Revenues, Expenses, Gains, and Losses that have yet to be realized and are excluded from Net Income on an income statement. Other Comprehensive Income represents the difference between Net Income and Comprehensive Income.

CREDIT, for period of time

Net Income

Net Income is the difference between Comprehensive Income after removing Other Comprehensive Income.

CREDIT, for period of time

Net Cash Flow

Net Cash Flow is the sum of all cash flows from operating, investing, and financing activities.

DEBIT, for period of time

Net Cash Flow from Operating Activities

Net Cash Flow from Financing Activities is the sum of all cash flows from operating activities.

DEBIT, for period of time

Net Cash Flow from Investing Activities

Net Cash Flow from Financing Activities is the sum of all cash flows from investing activities.

DEBIT, for period of time

Net Cash Flow from Financing Activities

Net Cash Flow from Financing Activities is the sum of all cash flows from financing activities.

DEBIT, for period of time

1.2 Interrelationships

The following provides information about the formal interrelationships between the elements of a financial statement that are informally defined by common practice. [FINANCIAL-STATEMENT] or are implied and understood common practice.

Assets = Liabilities + Equity

The accounting equation; the sum of Assets is equal to the sum of Liabilities plus the sum of Equity. The accounting equation is well understood common practice. For additional information see: Wikipedia, Accounting Equation

Comprehensive income = Revenues - Expenses + Gains - Losses

Comprehensive income is comprised of the sum of Revenues less the sum of Expenses plus the sum of Gains minus the sum of Losses.

Equity(T1) = Equity(T0) + Comprehensive income(P1) + Investments by owners(P1) - Distributions to owners(P1)

The ending balance of Equity (T1) is equal to the beginning balance of equity (T0) plus Comprehensive income for the period (P1) plus Investments by owners during the period (P1) less Distributions to owners during the period (P1).

Equity(T1) = Equity(T0) + (Revenue(P1) - Expenses(P1) + Gains(P1) - Losses(P1)) + (Investments by Owners(P1) - Distributions to Owners(P1)) + Liabilities(T1) - Assets(T1)

The ending balance of Equity (T1) is equal to the beginning balance of Equity (T0) plus the components of Comprehensive Income for Comprehensive income for the period (P1) (Revenues, Expenses, Gains, Losses) plus Investments by Owners during the period (P1) less Distributions to Owners during the period (P1) plus Liabilities(T1) less Assets(T1).

Net Cash Flow(P1) = Net Cash Flow from Operating Activities(P1) + Net Cash Flow from Investing Activities(P1) + Net Cash Flow from Financing Activities(P1)

Net cash flow is comprised of the sum of net cash flows from operating, investing, and financing activities.

Cash and Cash Equivalents(T1) = Cash and Cash Equivalents(T0) + Net Cash Flow(P1)

The ending balance of Cash and Cash Equivalents (T1) is equal to the beginning balance of Cash and Cash Equivalents (T0) plus Net Cash Flow for the period (P1).

Assets = Current Assets + Noncurrent Assets

Assets is comprised of the sum of Current Assets and Noncurrent Assets.

Liabilities = Current Liabilities + Noncurrent Liabilities

Liabilities is comprised of the sum of Current Liabilities and Noncurrent Liabilities.

Equity = Equity Attributable to Noncontrolling Interests + Equity Attributable to Noncontrolling Interests

Equity is comprised of the sum of Equity from controlling and noncontrolling interests.

1.3 Statements

The following provides information about the formal statements within a set of financial statement that are informally defined by common practice and not disputed. [FINANCIAL-STATEMENT].

Statement of Financial Position

A Statement of Financial Position (a.k.a. Balance Sheet) is used to report the elements Assets, Liabilities and Equity.

Statement of Financial Condition

A Statement of Financial Condition (a.k.a. Income Statement, Statement of Operations) is used to report Revenues, Expenses, Gains, Losses, and Comprehensive Income.

Statement of Changes in Equity

A Statement of Changes in Equity is used to report Equity, Comprhensive Income, Investments by Owners, Distributions to Owners.

Statement of Cash Flow

A Statement of Cash Flow is used to report net cash flow from operating, investing, and financing activities and the change in cash and cash equivalents.

1.4 Examples

The following are examples of a set of financial statements using the elements of financial statements which conform to the interrelationships of the elements:

Statement of Financial Position

Statement of Comprehensive Income

Statement of Changes in Equity

Prior Period Error (Restatement)

Statement of Cash Flows

Policies

Variance

Segment Revenues

Stock Plan Activity

Financial Highlights

1.6 Types

The following graphic shows types and subtypes (a.k.a. general-special assocations, wider-narrower associations) of the elements of financial statements:

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