ELEMENTS OF FINANCIAL STATEMENTS
Assets – a present economic resource controlled by the entity as a
result of past events
Liability – a present obligation of the entity to transfer an economic
resource as a result of past events
Equity – the residual interest in the assets of the entity after deducting
all its liabilities
Income – increases in assets, or decreases in liabilities, that result in
increase in equity, other than those relating to contributions from
holders of equity claims
Expenses – decreases in assets, or increases in liabilities, that result in
decreases in equity, other that those relating to distributions to holders
of equity claims
Financial Position
Asset
Per March 2018 Conceptual Framework for Financial Reporting
(Conceptual Framework), asset is a present economic resource
controlled by the entity as a result of past events.
An economic resource is a right that has the potential to produce
economic benefits.
Liability
A liability is a present obligation of the entity to transfer an economic
resource as a result of past events. For a liability to exist, three criteria
must all be satisfied:
- the entity has an obligation;
- the obligation is to transfer an economic resource; and
- the obligation is a present obligation that exists as a result of
past events
An obligation is a duty or responsibility that an entity has no practical
ability to avoid.
, An obligation is always owed to another party (or parties).
The other party (or parties) could be a person or another entity, a
group of people or other entities, or society at large.
Equity
Equity is the residual interest in the assets of the enterprise after
deducting all its liabilities.
They are claims against the entity that do not meet the definition of a
liability.
Equity may pertain to any of the following depending on the form of
business organization:
- In a sole proprietorship, there is only one owner's equity account
because there is only one owner.
- In a partnership, an owner's equity account exists for each
partner.
- In a corporation, owners' equity or stockholders' equity consists
of share capital, retained earnings and reserves representing
appropriations of retained earnings among others.
Financial Performance
Income is increases in assets, or decreases in liabilities, that result in
increases in equity, other than those relating to contributions from
holders of equity claims.
Expenses are decreases in assets, or increases in liabilities, that result
in decreases inequity, other than those relating to distributions to
holders of equity claims.
Contributions from holders of equity claims are not income, and
distributions to holders of equity claims are not expenses.
Income and expenses are the elements of financial statements that
relate to an entity's financial performance.
Assets – a present economic resource controlled by the entity as a
result of past events
Liability – a present obligation of the entity to transfer an economic
resource as a result of past events
Equity – the residual interest in the assets of the entity after deducting
all its liabilities
Income – increases in assets, or decreases in liabilities, that result in
increase in equity, other than those relating to contributions from
holders of equity claims
Expenses – decreases in assets, or increases in liabilities, that result in
decreases in equity, other that those relating to distributions to holders
of equity claims
Financial Position
Asset
Per March 2018 Conceptual Framework for Financial Reporting
(Conceptual Framework), asset is a present economic resource
controlled by the entity as a result of past events.
An economic resource is a right that has the potential to produce
economic benefits.
Liability
A liability is a present obligation of the entity to transfer an economic
resource as a result of past events. For a liability to exist, three criteria
must all be satisfied:
- the entity has an obligation;
- the obligation is to transfer an economic resource; and
- the obligation is a present obligation that exists as a result of
past events
An obligation is a duty or responsibility that an entity has no practical
ability to avoid.
, An obligation is always owed to another party (or parties).
The other party (or parties) could be a person or another entity, a
group of people or other entities, or society at large.
Equity
Equity is the residual interest in the assets of the enterprise after
deducting all its liabilities.
They are claims against the entity that do not meet the definition of a
liability.
Equity may pertain to any of the following depending on the form of
business organization:
- In a sole proprietorship, there is only one owner's equity account
because there is only one owner.
- In a partnership, an owner's equity account exists for each
partner.
- In a corporation, owners' equity or stockholders' equity consists
of share capital, retained earnings and reserves representing
appropriations of retained earnings among others.
Financial Performance
Income is increases in assets, or decreases in liabilities, that result in
increases in equity, other than those relating to contributions from
holders of equity claims.
Expenses are decreases in assets, or increases in liabilities, that result
in decreases inequity, other than those relating to distributions to
holders of equity claims.
Contributions from holders of equity claims are not income, and
distributions to holders of equity claims are not expenses.
Income and expenses are the elements of financial statements that
relate to an entity's financial performance.
