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Unit 1- Acc 21 - Coggle Diagram

- - - - Financial concept of capital- Capital= net assets/equity of the entity
      - Physical concept of capital- Capital= production capacity
      - Maintained of net assets at beginning = net assets at end excluding any distributions/ contributions
      - Measurement done in nominal monetary units or units of constant purchasing power
      - Nominal monetary units- Profit= increase in monetary capital. Increases in value of assets known as holding gains, nevertheless remain profits
      - Constant purchasing power- Profit represented by increase in invested purchasing power. Only portion of increase in prices of assets represent profits- rest considered capital maintenance adjustments and form part of equity, not profits
      - Prices changes in assets and liabilities considered changes in physical production capacity and accounted for as capital maintenance adjustments against entity, not recognised as profits
- - - - Ability to make difference to decisions
      - Value- Predictive/ Confirmatory
      - Materiality- If omission/ misstatement will influence decisions. Entity specific- based on nature/ magnitude
      - To think about
        
        Qualitatively/ Quantitatively material?
        
        Providing predictive value for the future- likelihood of inflow or outflow of economic benefits?
        
        Any existence uncertainty?
        
        Can the right be transferred or sold confirming reasonable probability of inflow of economic benefits?
        
        Meets definition of element
    - - Substance over form
      - Three characteristis
        
        Neutrality- FS prepared without bias
        
        Free from error- Description of event or transaction free from error
        
        Completeness- FS have all information needed to understand economic events + transactions.
      - Any measurement uncertainty?
- - - - Asset- The value of the costs incurred in acquiring or creating the asset, comprising the consideration paid to acquire or create the asset plus transaction costs
      - Liability- Value of the consideration received to incur or take on the liability minus transaction costs
      - Updated to depict, if applicable
        
        Payments received that extinguish part or all of the asset
        
        Accrual of interest to reflect any financing component of the asset
        
        Consumption of part or all of the economic resources that constitute the asset (depreciation)
      - Updated to depict, if applicable
        
        Fulfillment of part or all of the liability
        
        Effect of event that increase the value of the obligation to transfer the economic resources needed to fulfil the liability (onerous- if the historical cost is no longer sufficient to depict the obligation to fulfil the liability.
        
        Accrual of interest to reflect any financing component of the liability
      - For financial assets + liabilities, a way to apply the historical cost basis, is to measure the items at amortised cost
    - - Measures provide monetary information using information updated to reflect conditions at the measurement date.