Key Terms Unit 1

Question 1

Asset

Answer 1

A present economic resource controlled by the entity as a result of past events.
Current: Expected to be consumed, sold or converted to cash within 12 months of the reporting period.
Non-Current: Expected to be held by the entity for a number of years

Question 2

Liability

Answer 2

A present obligation of the entity to transfer an economic resource as a result of past events.
Current: Reasonably expected to be settled within 12 months after the reporting period
Non-Current: Not required to be settled within 12 months after the reporting period

Question 3

Owner’s Equity

Answer 3

the residual interest in the assets of the entity after deducting all its liabilities.

Question 4

Revenue

Answer 4

An increase in assets or reduction in liabilities that leads to an increase in owner’s equity (except for capital contribution)

Question 5

Expense

Answer 5

A decrease in assets or increase in liabilities that leads to a decrease in owner’s equity (except for drawings)