Conceptual Framework - basic substances of financial statement

Question 1

Economic resource

Answer 1

A right that has the potential to produce economic benefits

Question 2

Asset

Answer 2

Present economic resource controlled by the entity as a result of past event

Question 3

Liability

Answer 3

Present obligation of the entity to transfer economic resource as a result of past event

Question 4

Present obligation

Answer 4

Responsibility that an entity has no practical ability to avoid, this can be legal or constructive (past behaviour).

Question 5

Equity

Answer 5

Residual interest in the assets of the entity after deducting all its liabilities

Question 6

Income

Answer 6

Increase in asset or decrease in liabilities that results in increase in equity, other than those relating to contributions from holders of equity claims

Question 7

Expense

Answer 7

decrease in assets or increaase in liabilities that results in a decrease in equity, other than those relating to contributions from holders of equity claims

Question 8

Recognition/ Derecognition

Answer 8

Items should be recognised if it meets the definition of one of the elements of financial statements.

Derecognise when they no longer meet the definition.