Identify and describe the two balancing sections of the statement of changes in financial position.
What will be an ideal response?
ANSWER:
The two balancing sections of the statement of changes in financial position are called sources of resources and uses of resources. Sources of resources are defined as transaction credits. Transaction credits arise from increases in liabilities and owners’ equity and decreases in assets. Increases in liabilities and owners’ equity represent new capital available to the firm from external sources, such as debt and stock issues, and internal sources, such as net income. Proceeds from the disposal of assets also generate internal sources of resources.
Uses of resources are defined as transaction debits. Transaction debits arise from decreases in liabilities and owners’ equity and increases in assets. Decreases in liabilities and owners’ equity represent a reduction in the firm’s capital. These types of transactions include debt retirement and capital reductions from many sources including treasury stock purchases, dividend payment, and net losses. Asset increases represent new investment.
You might also like to view...
When a company sells bonds between interest dates, the company normally will collect from the investors both the selling price and the interest accrued on the bonds from the interest payment date prior to the date of sale
Indicate whether the statement is true or false
Which of the following statements about the stages in the evolution of selling is true?
A. Customer needs are matched with a tailored offering in the procreator stage. B. Problem-solver selling is typically found in buyers' markets. C. Competition is nonexistent in the procreator stage. D. The persuader stage is typically found in sellers' markets. E. The intensity of competition is greatest for salespeople at the provider stage.
Which of the following is not true regarding the discussion memorandum that preceded the conceptual framework?
a. It represented the end product of the FASB’s deliberations related to the conceptual framework project. b. The most important new issue brought up in the document was capital maintenance. c. It brought up three views of financial accounting and financial statements. d. It presented various definitions for basic accounting terms.
The amount of foreign currency that one U.S. dollar will buy is called the
A) base rate. B) counter rate. C) indirect rate. D) direct rate. E) forward rate.