Question

Indicate which elements that are most directly related to measuring an enterprise's performance and financial status are being described below. 1. Arises from peripheral or incidental transactions. Obliges a transfer of resources because of a present, enforceable obligation. 3. Increases in the ownership interest through issuance of shares. 4. Cash dividends to owners (declared and paid). Revenues or Gains Losses Revenues or Expenses Revenues Assets Expenses Gains Equity Liabilities Gains or Losses 5. An expenditure that has future economic benefit. 6. Decreases in assets during the period for the payment of income taxes. 7. Arises from income-generating activities that are the entity's ongoing major or central operations. 8. Is the residual interest in the enterprise's assets after deducting its liabilities. Increases assets during the period through the sale of inventory. 9. 10. Decreases assets during the period by purchasing the company's own shares. (b) Indicate which element listed above is being illustrated in the examples that follow. Consider the current definitions of both assets and liabilities. 1. Notes Co. has a written contract to receive money from the sale of copies of future recordings of music yet to be written. 2. ReadyMart Inc. has inventory out on consignment at a local retailer waiting for sale to the final customer. 3. Music Corp. has a written contract to deliver a percentage of future music revenues (royalties) from the sale of existing recordings. A

Answer 1

a)

S.no	Elements
1	Gains, Losses
2	Liabilities
3	Investment by owners, Comprehensive income
4	Distribution to owners
5	Comprehensive income (Revenue and gains also possible)
6	Assets
7	Comprehensive income
8	Revenue, Expenses
9	Revenues
10	Distribution to owners

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b)

S.no	Elements
1	Assets
2	Assets
3	Liability