Please Answer All Questions Also Posted Additional Aid

Please Answer All Questionsive Also Posted Additional Aid After Each

Please answer ALL questions I've also posted additional aid after each question. Please refer to it. Essay words Please state example whenever possible. (a) Describe the general purpose of the statement of comprehensive income. In addition, explain the terms income and expenses as defined by the Conceptual Framework for Financial Reporting. This is how part (a) should consist of: statement of comprehensive income - measures performance of company comprehensive income (other comprehensive income (NOT FROM trading / operations) Trading profit and loss account - for a period of time usually less 1 year Define statement of comprehensive income (aim and purpose) Define income (revenue and gain) Define expenses (expense and losses) then distinguish both the revenue gain, expenses, and losses Recognition criteria measurement bases historical cost (b) Describe the general purpose of the statement of financial position. In addition, explain the terms asset, liability, and equity as defined by the conceptual framework for financial reporting. This is what part (b) should consist of: Statement of financial position - measures of financial position - balance sheet Assets: Resources of company - what the company owns? Source of funds - what the company owes? Purpose of statement of financial position Define its aim and purpose, who are the users, and what do they look for from this statement? Define asset (current, non-current) Recognition of assets define liabilities (current, non-current) Recognition of liabilities Measurement + all bases in IAS 1 + fair value Define equity (prove components accounts) Do equity for limited company, sole trader, and partnership Statement of changes in equity (capital) (c) Explain the accrual basis of accounting by defining the principles involved. Illustrate your answer by taking the example of the cost of sales adjustment in statement of comprehensive income. There are 2 parts to (c): For the accrual basis: Explain what is accrual basis Contrast with cash basis Explain the matching concept The 4 underlying principles For the cost of sales adjustment: Do not Google, just help me to give examples and then express them in words.

Paper For Above instruction

The statement of comprehensive income (SCI) serves as a fundamental financial report that measures a company's performance over a specific period, usually one year. It encompasses all income and expenses, including both those arising from ordinary trading activities and other comprehensive income (OCI), which reflects gains and losses not realized from ongoing operations. The primary purpose of the SCI is to provide investors, creditors, and other stakeholders with a detailed overview of the company's profitability, enabling them to assess the entity's financial health and operational efficiency.

Within the framework of the Conceptual Framework for Financial Reporting, 'income' is defined as inflows or enhancements of assets or decreases of liabilities that result in an increase in equity, excluding contributions from owners. It is subdivided into revenue and gains. Revenue is the gross inflow of economic benefits earned from core business activities, such as sales of goods or services. Gains, on the other hand, are increases in economic benefits from peripheral or incidental transactions, such as the sale of an asset at a profit.

Expenses are outflows or depletions of assets or incurrences of liabilities that lead to a decrease in equity, excluding distributions to owners. Expenses can be operational, such as cost of goods sold (COGS), wages, and rent, or realized losses from asset impairments or liabilities settling at values higher than their carrying amount. Recognition of income and expenses is governed by criteria such as reliable measurement and relevance, often measured using historical cost or fair value, depending on the nature of the item.

The purpose of the statement of financial position (balance sheet) is to present a snapshot of an entity's financial standing at a specific point in time. It indicates what the company owns (assets), what it owes (liabilities), and the residual interest of owners (equity). Users of the financial position, including investors, creditors, and regulators, look for insights into the company's liquidity, financial flexibility, and capital structure.

An asset is a resource controlled by the entity as a result of past events, expected to generate future economic benefits. Assets are classified as current (expected to be used or converted into cash within one year) or non-current (held for long-term use, such as property, plant, and equipment). Recognition of assets occurs when the entity controls the resource, and its cost can be reliably measured, with measurement bases including historical cost and fair value per IAS 16 and IAS 13.

Liabilities represent present obligations arising from past events, which are settled through the transfer of resources embodying economic benefits. Like assets, liabilities are classified as current (due within one year) or non-current (due after one year). Recognition occurs when it is probable that an outflow of resources will occur, and the amount can be reliably measured.

Equity is the residual interest in the assets of the entity after deducting liabilities. For companies, it includes share capital, retained earnings, and other reserves. For sole traders and partnerships, it often comprises owner’s capital accounts. The statement of changes in equity captures movements in these components over a period, such as profits retained or drawings made.

The purpose of the statement of financial position is to inform stakeholders about the entity’s liquidity, financial stability, and sources of funds. Users analyze this statement to make investment or lending decisions, evaluate financial risks, and assess the company's capacity to meet its obligations.

The accrual basis of accounting recognizes economic events when they occur, regardless of when cash is received or paid. Its principles include the matching principle, which states expenses should be recognized in the same period as the revenues they help generate; the consistency principle, ensuring comparability over periods; the prudence principle, encouraging cautious valuation; and the going concern assumption, assuming the entity’s continuity.

Compared to cash basis accounting, which records transactions only when cash changes hands, accrual accounting provides a more comprehensive view of financial performance and position. For example, in the context of cost of sales, if inventory purchased during the period has not yet been sold, the true cost should be recognized in the period when the sale occurs, aligning expenses with the related revenues. This adjustment involves recognizing the opening inventory, purchases, and closing inventory to determine actual cost of goods sold (COGS).

In practice, if a company recorded a sale but had not yet recognized the corresponding cost of goods sold, the matching principle necessitates adjusting the income statement to reflect the actual cost linked to those sales. For example, if inventory costing $10,000 was sold during the period, and the opening inventory was $5,000 with purchases of $8,000, the COGS would be calculated as the sum of opening inventory and purchases minus closing inventory, ensuring expenses are matched accurately with revenues (e.g., COGS = $5,000 + $8,000 - $3,000 = $10,000). This adjustment ensures the financial statements reflect true profitability, consistent with accrual principles.

References

• Financial Accounting Standards Board. (2021). Statement of Financial Accounting Concepts No. 6: Elements of Financial Statements.
• International Accounting Standards Board. (2022). IAS 1: Presentation of Financial Statements.
• International Accounting Standards Board. (2020). IAS 16: Property, Plant and Equipment.
• International Accounting Standards Board. (2019). IAS 13: Fair Value Measurement.
• Kieso, D., Weygandt, J., & Warfield, T. (2020). Intermediate Accounting (16th ed.). Wiley.
• Needles, B. E., & Powers, M. (2018). Financial Accounting (12th ed.). Cengage Learning.
• FASB. (2021). Conceptual Framework for Financial Reporting.
• Healy, P. M., & Palepu, K. G. (2017). Business Analysis & Valuation: Using Financial Statements (6th ed.). Cengage Learning.
• EPS. (2020). Understanding Financial Statements: Balance Sheet, Income Statement, and Cash Flow Statement. European Payments Council.
• Porter, M. E. (1985). Competitive Advantage. Free Press.