Chapter 7 Presentation and Disclosure, Concept of Capital

• Physical Capital


  quantitative measure of the physical productive capacity to produce goods and services
• Financial Capital


  monetary amount of the net assets contributed by shareholders and the amount of the increase in net assets resulting from earnings retained by the entity
• Return on capital


  amount in excess of their original investment
• Return of capital


  erosion of capital invested in the entity
• Capital Maintenance Approach


  net income occurs only after the capital used from the beginning if the period is maintained
• Transaction Approach


  traditional preparation of an income statement
• Aggregation


  adding together of assets, liabilities, equity, income and expenses that have similar or shared characteristics and are included in the same classification
• Classification


  sorting of assets, liabilities, equity, income and expenses on the basis of shared or similar characteristics
• c


  under the financial capital concept, net income occurs whena. the nominal amount of net assets at year-end increasedb. the physical productive capital at year-end increased after excluding any distributions to and contributions from ownersc. the nominal amount of net assets at year-end increased after excluding distributions to and contributions from ownersd. the physical productive capital at year-end increased
• d


  which statement regarding the term profit is true?a. profit is any amount over and above that required to maintain the capital at the beginning of the periodb. profit is equal to income minus expensesc. profit is the equivalent of net income under IFRSd. all of these statement are true about the term profit
• a


  which concept is applied to net income and other comprehensive income?a. financial capitalb. physical capitalc. legal capitald. borrowed capital
• b


  the physical capital maintenance concept requires the adoption of which measurement basis?a. historical costb. current costc. fair valued. present value
• a


  financial capital is defined asa. net assets in monetary termsb. net assets in terms of physical productive capacityc. legal capitald. share capital issued and outstanding
• d


  what is the new term to describe the statement of profit or loss together with the statement showing other comprehensive incomea. income statementb. statement of profit or lossc. statement of other comprehensive income d. statement of financial performance
• a


  income and expenses are classified asa. profit or loss and other comprehensive incomeb. profit loss and retained earningsc. retained earnings and other comprehensive incomed. ordinary and extraordinary
• d


  all of the following can considered appropriate classification, except a. current and noncurrent assetsb. current and noncurrent liabilitiesc. ordinary share capital and preference share capitald. offsetting asset and liability
• a


  it is the sorting of assets, liabilities, equity, income and expenses with similar characteristicsa. classificationb. summarizationc. interpretationd. recognition
• d


  the presentation and disclosure requirement achieves all of the following, excepta. an effective communication toolb. more relevant and faithfully represented financial informationc. understandability and comparability of informationd. financial position, financial performance and cash flows
• The presentation and disclosure can be an effective communication tool about the information in financial statements.
• Presentation and Disclosure

  • Effective communication of information in financial statements makes the information more relevant and contributes to a faithful representation of an entity's assets liabilities, income and expenses.
  • Effective communication of information in financial statements also enhances the understandability and comparability of information in the financial statements.
• Presentation and Disclosure

  • Effective communication in financial statements is supported by not duplicating information in different parts of the financial statements.

  Duplication is usually unnecessary and can make financial statements less understandable.
• c


  under the financial capital concept, net income occurs whena. the nominal amount of net assets at year-end increasedb. the physical productive capital at year-end increased after excluding any distributions to and contributions from ownersc. the nominal amount of net assets at year-end increased after excluding distributions to and contributions from ownersd. the physical productive capital at year-end increased
• a


  which concept is applied to net income and other comprehensive income?a. financial capitalb. physical capitalc. legal capitald. borrowed capital
• b


  the physical capital maintenance concept requires the adoption of which measurement basis?a. historical costb. current costc. fair valued. present value
• a


  financial capital is defined asa. net assets in monetary termsb. net assets in terms of physical productive capacityc. legal capitald. share capital issued and outstanding
• d


  what is the new term to describe the statement of profit or loss together with the statement showing other comprehensive incomea. income statementb. statement of profit or lossc. statement of other comprehensive income d. statement of financial performance
• a


  income and expenses are classified asa. profit or loss and other comprehensive incomeb. profit loss and retained earningsc. retained earnings and other comprehensive incomed. ordinary and extraordinary
• d


  all of the following can considered appropriate classification, except a. current and noncurrent assetsb. current and noncurrent liabilitiesc. ordinary share capital and preference share capitald. offsetting asset and liability
• a


  it is the sorting of assets, liabilities, equity, income and expenses with similar characteristicsa. classificationb. summarizationc. interpretationd. recognition
• d


  the presentation and disclosure requirement achieves all of the following, excepta. an effective communication toolb. more relevant and faithfully represented financial informationc. understandability and comparability of informationd. financial position, financial performance and cash flows
• Physical Capital


  Net income occurs "when the physical productive capital of the entity at the end of the year exceeds the physical productive capital at the beginning of the period, also after excluding distributions to and contributions from owners during the period.
• Current Cost


  Physical Capital requires that productive assets be measured at ...
• Physical Capital


  Quantitative measure of the physical productive capacity to produce goods and services (unit of output per day or physical capacity of productive assets to produce goods and services)
• Net asset Approach


  Financial approach is also known as the ...
• Financial Capital


  net income occurs "when the nominal amount of the net assets at the end of the year exceeds the nominal amount of the net assets at the beginning of the period, after excluding distributions to and contributions by the owners during the period."
• Historical Cost


  Financial capital is the traditional concept based on ... and adopted by most entity.
• Financial Capital


  Is the Monetary amount of the net assets contributed by shareholders and the amount of the increase in net assets resulting from earnings retained by the entity.
• Financial Capital


  Invested money or invested purchasing power, capital is synonymous with net assets or equity of the entity.
• Concepts of Capital Maintenance

  1. Financial Capital2. Physical Capital
• Return of Capital

  erosion of the capital invested in the entity.