Question

(Elements of Financial Statements) Ten interrelated elements that are most directly related to measuring the performance and financial status of an enterprise are provided below.

Assets Distributions to owners Expenses Liabilities Comprehensive Income Gains Equity Revenues Losses Investments by owners

Instructions

Identify the element or elements associated with the 12 items below.(a) Arises from peripheral or incidental transactions.

(b) Obligation to transfer resources arising from a past transaction.

(c) Increases ownership interest.

(d) Declares and pays cash dividends to owners.

(e) Increases in net assets in a period from nonowner sources.

(f) Items characterized by service potential or future economic benefit.

(g) Equals increase in assets less liabilities during the year, after adding distributions to owners and subtracting investments by owners.

(h) Arises from income statement activities that constitute the entity’s ongoing major or central operations.

(i) Residual interest in the assets of the enterprise after deducting its liabilities.

(j) Increases assets during a period through sale of product.

(k) Decreases assets during the period by purchasing the company’s own stock.(l) Includes all changes in equity during the period, except those resulting from investments by owners and distributions to owners.

Short answer

a) Gains or losses, (b) Liabilities, (c) Investments by owners, comprehensive income, and also comes under revenues and gains (d) Distribution to owners (e) Comprehensive income and also gains and revenues (f) Assets (g) Comprehensive Income (h) Revenues, expenses (i) Equity (j) Revenues (k) Distribution to owners (l) Comprehensive Income

Step-by-step solution

(a) Transactions that are related to peripheral or incidental  – Gains or losses

Gains or losses – The arises from peripheral or incidental transactions are associated with gains or losses element.

(b) Transactions that are related to the obligation to transfer resources arising from a past transaction – Liability

Liability –The obligation to transfer resources arising from a past transaction is associated with the liability element.

(c) Transactions related to Increases ownership interest –  Investments by owners, comprehensive income, and also comes under revenues and gains

Investment by owners – The increases in ownership interest are associated with Investment by owners, Comprehensive income, and Gains or losses.

(d) Transaction related to declaring and paying cash dividends to owners  –  Distribution to owners

Distribution to owners – Declares and paying cash dividends to owners are associated with the liability element.

(e) Transaction related to Increases in net assets in a period from non-owner resources –  Comprehensive income and also gains and revenues

Comprehensive income –The Increase in net assets in a period from non-owner resources is associated with the comprehensive income as well as gains and revenues.

(f) Transaction related to Items characterized by service potential –   Assets

Assets – Items characterized by service potential are associated with the liability element.

(g) Transaction related to Equals increase in assets fewer liabilities during the year, after adding distributions to owners and subtracting investments by owners – Comprehensive Income

Comprehensive income – Equals increase in assets and fewer liabilities during the year, after adding distributions to owners and subtracting investments by owners is associated with comprehensive income.

(h) Transactions Arising from income statement activities that constitute the entity's ongoing major or central operations – Revenues, expenses

Revenues or expenses – Transactions Arising from income statement activities that constitute the entity's ongoing major It is associated with the revenues or expenses element.

(i) Transaction relating to Residual interest in the assets of the enterprise after deducting its liabilities – Equity

Equity – Residual interest in the assets of the enterprise after deducting its liabilities is associated with the equity element.

(j) Transactions related to Increased assets during a period through the sale of Product – Revenues

Revenues – Increased assets during a period through the sale of Products are associated with the revenue element.

(k) Transaction relating to Decreases assets during the period by purchasing the company's stock – Distribution to owners

Distribution to owners – Decreases assets during the period by purchasing the company's stock is associated with the distribution to owners element.

(l) Transactions relating to including all changes in equity during the period, except those resulting from investments by owners and distributions to owners – Comprehensive Income

Comprehensive income – includes all changes in equity during the period, except those resulting from investments by owners, and distributions to owners are associated with the comprehensive income element.