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Ebook Financial accounting (3th edition): Part 2

(BQ) Part 2 book "Financial accounting" has contents: Inventories; financial assets, liabilities and equity, accounting and taxation, cash flow statements, group accounting, foreign currency translation, accounting for price changes, financial appraisal, international analysis. | FINA_C11.qxd 4/13/07 2:12 PM Page 216 Chapter 11 Financial assets, liabilities and equity Contents Objectives 11.1 Introduction 11.2 Cash and receivables 11.3 Investments 11.3.1 Types of investment 11.3.2 Valuation problems 11.3.3 Accounting for gains and losses 11.4 Liabilities 11.4.1 Definition 11.4.2 Creditors 11.4.3 Provisions 11.4.4 Contingent liabilities 11.5 Equity 11.5.1 Subscribed capital 11.5.2 Share premium 11.5.3 Revaluation reserve 11.5.4 Legal reserve 11.5.5 Profit and loss reserves 11.6 Reserves and provisions 11.7 Comparisons of debt and equity Summary References and research Exercises 217 217 220 220 221 222 223 223 223 225 227 228 228 229 230 230 230 231 234 235 236 236 After studying this chapter carefully, you should be able to: n outline the nature, recognition and measurement of financial assets (cash, receivables and investments) and financial liabilities; n tell when different types of investments should be valued in different ways, and when to record gains and losses; n explain that there are two main types of liabilities (creditors and provisions) and outline the current practices relating to their recognition and measurement; n list the components of an entity’s residual equity; n explain the differences in the meaning of accounting terms such as allowance, provision, fund and reserve; n distinguish between debt and equity securities, while understanding that securities can have features of both. 216 FINA_C11.qxd 4/13/07 2:12 PM Page 217 11.2 Cash and receivables 11.1 Introduction As explained earlier in this book, the items in a balance sheet can be summarized under the headings of three main elements: assets, liabilities and equity. Chapter 8 looked at the definition of assets and liabilities, and some ideas relating to their recognition. Chapters 9 and 10 concentrated on the recognition and measurement of a number of particular types of assets. This chapter includes coverage of the other main types of asset: