Elements of Financial Statements

Flashcards covering key concepts related to the elements of financial statements, including assets, liabilities, equity, net assets, share capital, reserves, income, and expenses.

Asset

A present economic resource controlled by an entity as a result of past events.

Liability

A present obligation arising from past events, requiring the entity to pay out money in the future.

Equity

The residual interest in the assets of an entity after deducting liabilities; essentially what is left in the business.

Net Assets

Assets minus liabilities, representing the total value of assets available after all obligations are accounted.

Share Capital

The amount of equity contributed by the shareholders to the business, often through the purchase of shares.

Reserves

Profits that have been retained in the business, not distributed to shareholders.

Income

An increase in an asset, typically resulting from the sale of goods or services.

Expenses

A decrease in an asset, often representing costs incurred in the process of generating income.