Financial Statement Elements and Classifications

Vocabulary flashcards covering key accounting terms, definitions, and recognition criteria for assets, liabilities, equity, and their current/non-current classifications.

Asset

A present economic resource controlled by an entity as a result of past events that has the potential to produce future economic benefits.

Economic Resource

A right that has the potential to produce economic benefits.

Control (of an Asset)

The entity’s ability to use a resource and obtain the benefits that arise from it.

Asset Recognition Criteria

An asset is recognized when future economic benefits are probable and its cost or value can be measured reliably.

Liability

A present obligation of an entity to transfer an economic resource as a result of past events.

Obligation

A duty or responsibility the entity has no practical ability to avoid, usually requiring payment, delivery of goods, or provision of services.

Liability Recognition Criteria

A liability is recognized when an outflow of resources is probable and the obligation amount can be measured reliably.

Equity

The residual interest in the assets of an entity after deducting all liabilities; represents the owner’s claim.

Comprehensive Income

Total profit or loss plus other gains (e.g., revaluation gains) that increase equity, excluding owner contributions.

Current Asset

An asset expected to be realized, sold, or consumed in the normal operating cycle, held for trading, realizable within 12 months, or cash/cash equivalents not restricted for at least 12 months.

Non-Current Asset

An asset that does not meet current-asset criteria and is expected to provide economic benefits beyond 12 months after the reporting period.

Current Liability

A liability expected to be settled in the normal operating cycle, held for trading, due within 12 months, or one for which the entity lacks an unconditional right to defer settlement for at least 12 months.

Non-Current Liability

A liability that does not meet the criteria for current liabilities and is not expected to be settled within 12 months.

Normal Operating Cycle

The time between acquiring assets for processing and their realization in cash or cash equivalents.

Residual Interest

The owner’s remaining claim on assets after all liabilities have been settled; another term for equity.