The elements of financial reports

Question 1

Define assets

Answer 1

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

Question 2

Define liability

Answer 2

Is a present obligation of the entity as a result of past events, the settlement of which is expected to result in an outflow from the entity.

Question 3

Define owners equity

Answer 3

The residual interest in the asset of the entity after the deduction of it’s liabilities.

Question 4

Define expense

Answer 4

An outflow of economic benefits in the form of a decrease in assets that reduces owners equity.

Question 5

Define revenue

Answer 5

An inflow of economic benefits in the form of an increase in assets that increases owners equity.

Question 6

What is the two fold effect?

Answer 6

Is the idea that all transactions have an impact on two sections of the accounting equation. Eg Assets, liabilities or owners equity.

Question 7

Define control accounts

Answer 7

Is a summary account that contains all of the transactions relating to a particular item but in summary form.
Eg- debtors control

Question 8

Negatives of control accounts

Answer 8

-Provides summary of accounts so the business wont know who to chase up when there is money to by owed.