Assets, liability and Equity

Question 1

What is an asset?

Answer 1

A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity

Question 2

What is the recognisation criteria of an asset

Answer 2

1) it’s probable that an inflow of future economic benefits will occur
2) The value of the asset can be measured reliably

Question 3

What is a liability?

Answer 3

A liability is a present obligation of the entity to transfer an economic resource as a result of a past event

Question 4

What is the recognition criteria of a liability?

Answer 4

1) it is probable that an outflow of future economic benefits will occur
2) The value of the liability can be measured reliably

Question 5

What is equity?

Answer 5

The proprietorship/entity is the residual interest in the asset of the entity after deducting all its liabilities

Question 6

What is the accounting equation?

Answer 6

A - L =P
A= L+ P
L = P - A

Question 7

What are the three aspects if the definition of an asset

Answer 7

• Right
• Potential to produce economic benefit
• Control

Question 8

What are the three aspects of a liability

Answer 8

• The entity has obligations
• The obligation is to transfer an economic resource
• The obligation is a present obligation that exists as a result of a past event

Question 9

What is an income

Answer 9

Income is an increase in assets or decreases in liabilities that result in an increase in equity, other than those relating to contributions from holders of equity claims

Question 10

What is an expense

Answer 10

Expenses are decreases in assets or increase in liabilities that result in decreases in equity, other than does relating to distributions to holders of equity claims