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Summary FRK111 chapter 3

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FRK111 chapter 3 Notes

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  • February 25, 2024
  • 9
  • 2023/2024
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Frk


CHAPTER 3: Financial Performance as
reflected in the statement of profit or
loss and other comprehensive income

SFP: assets, liabilities, and owner’s equity (A = E + L)


SPL: Income & expenses (profit & loss)
 Reflects the performance (profit/loss) of an entity.
 Income minus expenses = profit/(loss)
 Service entity
 Trading entity
Profit occurs when income > expenses.
Loss occurs when expenses > income.




Equity comprises 3 items:
+ Capital (invested by owner)
- Drawings taken (drawn) by owner for personal use
+ Profits or – losses

, 1. INCOME:
INCOME:
DEFINITION:
Increases in assets (e.g. debtors, bank); or
Decrease in liabilities (e.g. income received in advance);
That result in increases in equity, other than those related to contributions from holders of
equity (capital introduced by owner)


5 ( &2 * 1 , 7 , 2 1
Relevance (should be probability of inflow of economic benefits)
Faithful representation (should be able to measure income with accuracy)
5 ( $ / , 6$ 7 , 2 1 &2 1 &( 37
INCOME MUST BE EARNED BEFORE IT CAN BE RECOGNISED
 The amount must be measured reliably.
 Either receive cash OR (debtor)

Example3.3: OTHER INCOME:
Sony Traders let (rent out) some of their building and received R12 000 rent income.
Acc Debited Acc Credited Assets Equity Liability
Bank Rent income +12 000 +12 000

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