accounting and finance - topic 8

assets definition

an asset is a present economic resource controlled by, the entity as a result of past events

economic resource

a right that has potential to produce economic benefits

assets key aspects

right, potential to produce economic benefits and control

liabilities definition

a liability is a present obligation of the entity to transfer economic resource as a result of past events

liability key aspects

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

equity definition

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

income definition

increase in assets, decrease in liabilities and as a result of this an increase in equity, other then those relating to contribution from holders of equity claims

expenses definiton

decrease in assets, increase in liabilities and as a result of this an decrease in equity, other than those relating to distribution from holders of equity claims

unearned income definition

income which has been received but not yet earned - current liability

accrued income definition

income which has been earned but not yet received - current asset

doubtful debts

an estimation of debts which are unlikely to be paid - expense

bad debts

written off when it is definite that the money owed will not be received

assets recognition

provide users with financial statements with information that is useful, faithfully represent relevant phenomena, must be complete, free from error and neutral, measured in money terms

liabilities recognition

provides users with financial statements with information that is useful, faithfully represent relevant phenomena, must be complete, free from error and neutral, measured in money terms

income recognition

initial recognition of assets and derecognition of liabilities

expense recognition

initial recognition of liabilities and derecognition of assets

double entry for doubtful debts

debit: doubtful debts

credit: allowance for doubtful debts