Financial Elements

Question 1

Assets

Answer 1

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

Question 2

Liabilities

Answer 2

A liability is a current obligation of the business arising from past events and the future settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits

Question 3

Income

Answer 3

Income is the increase in economic benefits during the accounting period in the form of inflow or enhancement of assets or decrease in liabilities that results in the increase in equity, other than those relating to the contributions made by the owner

Question 4

Expenses

Answer 4

Expenses are the decrease in economic benefit during the accounting period in the form of outflows or depletions of assets or incurrence of liabilities which results in a decrease in equity, other than those relating to the distributions made to the owner.

Question 5

Equity

Answer 5

Equity is how much the business is worth if the owner were to sell all assets and pay off all liabilities. It shows the return of their investments in the entity
Assets - liabilities = equity

Question 6

Simple accounting equation

Answer 6

A - L= Eq

Question 7

Extended accounting equation

Answer 7

A + Ex = L+ I + Eq