2.7 Elements of financial statements

Question 1

According to the IASB Conceptual Framework, what are the two buildings blocks of financial statements?

Answer 1

1 Elements relating to statement of financial position (assets, liabilities, equity)
2 Elements relating to statement of financial performance (income and expenses)

Question 2

What are “assets”?

Answer 2

A present economic resource controlled by the entity as a result of past events.

Question 3

What are “liabilities”?

Answer 3

A present obligation or duty of responsibility to transfer an economic benefit as a result of past transactions.

Question 4

What is “equity”?

Answer 4

The residual interest in the assets of the entity after deducting liabilities.

Question 5

What is “income”?

Answer 5

Increases in assets or increases in liabilities resulting in increases in equity. (e.g. sales revenue).

Question 6

What are “expenses”?

Answer 6

Decreases in assets or increases in liabilities that result in decreases in equity.