Elements Definition

Question 1

What is the definition of an asset?

Answer 1

Something which is presently controlled by the entity, future economic benefit will flow to the entity and is the result of a past event.

Remember: PPF Past, Presently and Future Economic Benefit

Question 2

What is the definition of a liability

Answer 2

Something which is a PRESENT obligation of the entity, FUTURE ECONOMIC BENEFIT will flow from the entity and is the result of a PAST event.

Remember: PPF

Question 3

What is the definition of an expense?

Answer 3

Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrances in liabilities that result in decreases in equity other than those relating to distributions to owners

Remember: O,D,D,D

Question 4

What is the definition of income?

Answer 4

Increases in 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 Owners Equity

Answer 5

This represents the owners financial interest in the business. Calculated by Assets – Liabilities

Remember: EQ=A-L