Assets and Claims

What does the statement of financial position show about a business's wealth?

It shows the form in which the wealth is held and how much is held in each form.

What must be true for a resource to qualify as an asset?

It must be an economic resource that provides a right to potential economic benefits.

What are some examples of economic resources that qualify as assets?

Cash generated from producing goods or services, cash received from sales, and value received when used to satisfy debts.

What is required for an economic resource to be considered an asset in terms of control?

The economic resource must be under the control of the business.

How must the value of an asset be represented?

The economic resource must be capable of measurement in monetary terms.

What are some things that usually appear as assets on a financial statement?

Property, plant and equipment, fixtures and fittings, patents and trademarks, trade receivables, and investments.

Can an asset be intangible?

Yes, an asset does not have to be a tangible asset.

What is a claim in the context of financial statements?

A claim is an obligation of the business to provide cash or some other form of benefit to an outside party.

What does equity represent in financial terms?

Equity represents the claim of the owner against the business, also referred to as owner's capital.

What do liabilities represent in terms of claims on a business?

Liabilities represent the claims of other parties apart from the owners.