Elements Definitions

Question 1

What is the definition of an asset

Answer 1

A resource PRESENTLY controlled by the entity as a results of PAST events and from which FUTURE ECONOMIC BENEFITS are expected to flow

Remember P,P,F

Question 2

What is the definition of a liability

Answer 2

Liabilities are PRESENT obligations of the entity arising form PAST events, the settlement of which is expected to result in an outflow of FUTURE ECONOMIC BENEFIT.

Remember P,P,F

Question 3

What is the definition of owners equity

Answer 3

Entity is the residual interest in the assets of the entity after deducting all liabilities

Remember Eq = A - L

Question 4

What is the definition of income

Answer 4

Increases in the economic benefits during the accounting period in the form of inflows of assets (or decreases in liabilities) that result in increases in equity, other than those relating to contributions from owners.

Remember I,I,I,I,NC.

Question 5

What is the definition of Expenses

Answer 5

Decrease in economic benefits during the accounting period in the form of outflows or depletion of assets (or increasing in liabilities) that result in decreases in equity, other than those relating to distributions to equity participants.

Remember D,D,D,D,ND