Question

Distinguish among the terms realized, realizable, and realization. . How do conventional retained earnings differ from entity equity under the Anthony conception of the entity theory?

Answer 1

1) In accounting realized and realizable are terms referring to the assets which have either been received or would be received as a result of the organisation’s revenue recognition function. Realized indicates that either the firm has received the cash or a legitimate claims on the accounts receivable are in place. Realizable indicates the firm's ability to convert already held assets into known cash amount. Realization indicates the point where the revenue is earned and either claim to assets arises or cash is received. Realization is supplanted with the recognition; and indicates to the point when assets to be received due to the performance of the revenue function are realized or realizable, and the revenue function performance is accomplished substantially.

2) According to the Anthony conception of the entity theory, entity equity would not exceed the retained earnings to an extent, if any, of unpaid dividends on both preferred as well as the common stock