Accounting Elements Definitions

Question 1

Assets

Answer 1

Assets are economic resources controlled by the business as a result of past events. They have the potential to bring future economic benefit.

Question 2

Liabilities

Answer 2

Liabilities are current financial obligations of a business as a result of past events. They are expected to result in an outflow of economic benefit.

Question 3

Owner’s Equity

Answer 3

Owner’s equity is the residual interest an owner has in a business after liabilities are deducted from assets.

Question 4

Revenue

Answer 4

Revenues: increases in assets or decreases in liabilities that results in an increase in owner’s equity, other than contributions by the owner.

Question 5

Expenses

Answer 5

Expenses: decreases in assets or increases in liabilities that result in a decrease in owners equity, other than distributions to the owner.