Transcript for:
Recognition of Elements of Financial Statements

now we will learn recognition of the elements of financial statements five elements of financial statements assets liabilities incomes expenses and honors equity recognition is the process of capturing for inclusion in the statement of financial position or statement of financial performance March elements okay and now we have to see that which element would be included in the statement of financial position and which element would be included in the statement of financial performance obviously we will see if all elements are meeting their definition criteria first of all okay after giving a small example I will move ahead supposedly you have purchased a table immediately it will be coming in our mind it is an asset now listen to the next thing you have purchased the table and that table that you have purchased will be used by the security guard who is positioned at outside the gate of your premises outside gate of your premises have that is exposed to sunlight exposed to extreme weather conditions It is raining and sunny there. Experts say that this table that you have purchased which is used by the security guard will have a useful life of not more than 12 months. Now tell me, now such a furniture item, such a table. which you have purchased and it's not expected to be useful which is not getting potential economic benefit for the entity in future those crop asset may recognize Karenka you have a concept Johan up learn Karna jara I'm taking a recognition criteria kya hai first of all I'm a job If we want to recognize asset, expense, income, liability, then we have to see what is its probability of future economic benefit. Is it flow to the entity or flow from the entity? First we will see this. Obviously if its economic benefit is flowing, then for you is it an asset or expense? you have to get its economic benefit or if economic resources are outflow against it then it is your liability and then you will see its changes whether those expenses or income are made or not and after that the second very important point you have to see as a criteria that is the item has a cost or value that can be measured reliably reliable measurement of the judge connect about either you will debit or credit the asset or liability or expense or income or equity okay the you cheese had just go k up name recognition point of uses some is now job get the neck capture kiosk a up net accounting terminology may capture means up debit check credit current the a recognition killata yep capture career school up up me financial statement may recognize recognition so it means to credit debits next very important point you have to see relevance that you are crediting debits is this relevant for the user of financial statement for their decision making purposes it says that if its probability of flow of economic benefit is low then its relevance will also be low means it will be affected or if its existence will be uncertain then its relevance will be low and if you after its relevance second important qualitative characteristics its fundamental qualitative characteristics is faithfulness Faithful representation is affected by the measurement of the value. If it is not measured reliably, it will be considered as an element of uncertainty. If its recognition is inconsistent, then it is considered as a match. there is no accounting mismatch in it if you measure both on fair value then accounting mismatch ends So, its recognition inconsistency also affects faithful representation. And if presentation and disclosures are poor, then it will also affect its faithful representation. So, these are the things that we see from the recognition point of view. statement of financial position and statement of financial performance means in profit and loss asset, liability, equity, income or expenses so for that two important criteria I will tell you in which you will see its probable inflow or outflow and second you will see its reliable measurement that it can be reliably measured or not these are the recognition criteria for recognizing the elements of financial statements.