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CLARIFYING FUNDS STATEMENTS — THE TWO ENTITY TEST
Author(s) -
McKin Jill L.,
Martin Carrick A.,
Partington Graham H.
Publication year - 1983
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.1983.tb00226.x
Subject(s) - statement (logic) , test (biology) , confusion , meaning (existential) , database transaction , term (time) , accounting , capital (architecture) , financial statement , cash , business , actuarial science , computer science , political science , finance , psychology , law , history , audit , paleontology , physics , archaeology , quantum mechanics , psychoanalysis , psychotherapist , biology , programming language
A major shortcoming of the funds statement prepared under a resources concept is that the meaning of the term “resources” is unclear. A transaction test is usually adopted to identify entries involving funds, but it is apparent from published reports and from the Australian profession's recent exposure draft that substantial confusion remains. One response has been to reject the broader concepts in favour of narrower definitions such as cash or working capital. In this article, however, it is argued that an all resources funds statement, properly defined, has an important contribution to make. A “two entity” test is proposed which is claimed to be tighter and closer to the spirit of the original resources concept than the present transaction test.