1.1 Elements & Concepts

1.1 Elements & Concepts

1. ELEMENTS

   • Assets
     • Resources PRESENTLY CONTROLLED by the entity as a result of a PAST EVENT and from which FUTURE ECONOMIC BENEFIT is expected to flow to the entity
   • Liabilities
     • PRESENT OBLIGATIONS of the entity due to PAST EVENTS, the settlement of which is expected to result in an OUTFLOW of resources representing FUTURE ECONOMIC BENEFIT
   • Owner's Equity
     • ASSETS - LIABILITIES = EQUITY
   • Income
     • An INCREASE in ECONOMIC BENEFITS during the accounting period as INFLOW or ENHANCEMENT of ASSETS or DECREASE IN LIABILITIES which results in INCREASED EQUITY - but NOT OWNER'S CONTRIBUTION
   • Expense
     • A DECREASE in ECONOMIC BENEFITS during the accounting period as OUTFLOW or DEPLETION of ASSETS or INCREASED LIABILITIES which result in DECREASED EQUITY - but NOT OWNER'S DRAWINGS

2. CONCEPTS

   • Accounting Entity
     • Financial affairs of the business are kept separate from those of the owner. Assets, Liabilities, Income and Expenses are recorded in the statements of the business, and not that of the owner
   • Monetary Concept
     • All transactions are measured in NZ Dollars. This is the common unit of measure
   • Historic Cost
     • Assets are reported in the financial statements at the original purchase price
   • Going Concern
     • It is assumed that the entity will continue operating into the forseeable future. The business has no intention to liquidate
   • Accrual Accounting
     • Transactions are recorded until they occur and then reported in financial statements in the period to whch they relate, regardless when the cash changes hands
   • Period Reporting
     • The entity's economic activity can be divided into periods of equal length in order to provide timely information. This is important because information from one year can be compared with another to assist users to make decisions