Chapter 1 Financial Statements and Business Decisions.docx

5 Pages
Unlock Document

University of Waterloo
Accounting & Financial Management
AFM 101
Donna Psutka

Chapter 1: Financial Statements and Business Decisions 9/13/2013 8:26:00 AM Assets: - economic benefit (does it contribute to cash, do we control it, and benefits expected in the future) - Need to measure its financial value reliably (market value?) - To recognize an asset, there must be a dollar value to it - If you lease a car, you don’t actually own it, so the prepayment for the car (prepaid expenses) is an asset but the car itself isn’t Asset Measurement: A thousand objective measurements experts have agreed to measure the financial value of the assets identified earlier for a representative people What will experts need to know to measure the financial value of the asset? How much uncertainty? Cash Questions: How much in your bank? How much on hand? Cash on hand not in wallet? What currency? Does anybody owe you cash? Bank overdraft? - dispersion  small – cash, DVDs, books  medium – cars, homes  large – human capital, patents - Would the dispersion associated with Intel’s internally developed patent be closer to cash, car or human capital of a student (human capital) Liabilities: - obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefit - to be recognized on the balance sheet:  Meet the definition of the liabilities  Be probable  Measure its financial value reliably Liability Measurement - the dispersion of objective experts’ estimate of the values of liabilities can differ greatly  dispersion: o small – credit cards, parking fines, utilities and taxes o medium – college loans, car loans and leases, home mortgages o large: repay family member, com
More Less

Related notes for AFM 101

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.