Chapter : Measurement and Reporting of

Revenues and Expenses , Gains and Losses

Chapter Objectives :
1- List the elements of financial statement and
define them.
2- define events, circumstances, and
transaction.
3- Describe the criterion for recognition of
events.
4- Distinguish between Revenue and
gains.
5-Distinguish between Expenses and
Losses.
6- Explain the scope and measurement criteria
for expenses.
7- discuss the matching of costs and
revenues.
Elements of Financial Statements (10)
- Ten elements of financial statement , of
which five are concerned with balance
sheet while the other five belong to the
income statement.
- The items in financial statement represent
in words and numbers certain enterprise
resources , claims to those resources , and
the effects of transactions and other events
and circumstances that result in charge in
those resources and claims.

Elements of Financial Statements (10)
1. Assets
2. Liabilities
3. Equity
4. Investments by
Owners
5. Distributions to
Owners

6. Comprehensive
Income
7. Revenues
8. Expenses
9. Gains
10. Losses

Elements of Balance Sheet
Assets:
- Are probable future economic benefits
obtained or controlled by a particular
entity as a result of past transactions or
events.
- Resource controlled by enterprise as a
result of past events .


Elements of Balance Sheet
Liabilities:
- are probable future sacrifices of
economic benefit as result of past
events or transactions.

- A liability as a present obligation of
enterprise arising from past events.

Elements of Balance Sheet
Equity :
- Is the residual interest in assets of an entity that
remain after deducting its liability (the equity =
owner equity)
Investment by owner:
- Are increase in net assets of a particular
enterprise resulting from transfers to it from
other entities of something of value to
obtain or increase equity in it.
Elements of Balance Sheet
Distribution to owners :
- Are decrease in net assets of a
particular enterprise resulting from
transferring assets rending services by
enterprise to owner.

- Distribution to owners decrease equity
in an enterprise.

Elements of I ncome Statement
Revenue:
- Are inflows or other enhancement of assets
of entity or settlement of its liabilities
during a period from delivering or
producing goods rendering services or
other activities that constitute the entitys
ongoing major or central operations.

Elements of I ncome Statement
Expenses:
- Are outflows or other using up of assets of
entity or incurrence of its liabilities during
a period from delivering or producing
goods rendering services or carrying out
other activities that constitute the entitys
ongoing major or central operations .

Elements of I ncome Statement
Comprehensive Income:
- Is the change in equity (net
assets) of entity during a
period from transaction
from non-owner sources.
It includes all changes in
equity during a period
except those resulting from
investments by owners and
distributions to owners.

All changes in equity during a period except those
resulting from investments by owners and distributions
to owners.
Income Statement (in thousands)
Sales 285,000 $
Cost of goods sold 149,000
Gross profit 136,000
Operating expenses:
Advertising expense 10,000
Depreciation expense 43,000
Total operating expense 53,000
Income from operations 83,000
Other revenue (expense):
Interest revenue 17,000
Interest expense (21,000)
Total other (4,000)
Income before taxes 79,000
Income tax expense 24,000
Net income 55,000 $
Other Comprehensive
Income
Unrealized gains and
losses on available-
for-sale securities.
Translation gains and
losses on foreign
currency.
Plus others

+
Reported in
Stockholders Equity

LO 8 Explain how to report other comprehensive income.
Elements of I ncome Statement
Elements of I ncome Statement
Comprehensive Income:
The FASB decided that companies must display the
components of other comprehensive income in one
of three ways:
(1) a second income statement;
(2) a combined statement of comprehensive
income; or
(3) as a part of the statement of stockholders
equity.