Instructions: Below are eight of the ten elements of financial accounting and their definitions from Statement of Financial Accounting Concepts (SFAC) 6, Elements of Financial Statements. You can find more on these by looking at SFAC 6 at fasb. org, or clicking on the link to the Concepts Statements found on the homepage of the FASB ASC. Read the following carefully. Failure to follow instructions will negatively impact your grade. 1. Assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. 2. Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.
3. Equity or net assets is the residual interest in the assets of an entity that remains after deducting its liabilities. In a business enterprise, the equity is the ownership interest. In not-for-profit organization, which has no ownership interest in the same sense as a business enterprise, net assets is divided into three classes based on the presence or absence of donor-imposed restrictions—permanently restricted, temporarily restricted, and unrestricted net assets.4. Comprehensive income is the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.5. Revenues are inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.6. Expenses are outflows or other using up of assets or incurrences of liabilities (or a combination of both) from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major or central operations.7. Gains are increases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity except those that result from revenues or investments by owners.8. Losses are decreases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity except those that result from expenses or distributions to owners. REQUIRED: Your assignment is to choose two of these eight terms (each one you choose is worth 30 points), search the FASB ASC for these terms, and discuss how they meet the substance of the above definitions. You should have two or more paragraphs for each of the terms. The first paragraph is the FASB ASC section (be sure to show the term you chose, and the ASC section number as shown below). Then cut and paste the ASC section as shown below. Your second (or more) paragraph is your explanation of how the definition is applied in the ASC. You should discuss how it meets the substance of the element that you chose. You can also discuss alternative accounting treatments if appropriate, and anything else related to the element that illustrates your knowledge of the item that you choose. I can’t stress enough the importance of your supporting paragraph(s) – this is where you will earn the majority of your points.