The elements relating to the financial position of an entity/ business are the main element headings that make up the statement of financial position (balance sheet), namely: assets, liabilities and equity (owners’ equity).
- Asset: a resource controlled by the entity as a result of past transactions/ events and is associated with future economic benefits that are expected to flow to the entity in whatever form (use, income, disposal proceeds, etc.)
- Liability: a present obligation of the entity that arises from past transactions/ events. The settlement of a liability is expected to cause an outflow of resources from the entity (in the form of economic benefits being transferred to other parties)
- Equity: the residual interest in the assets of the entity after deducting its liabilities (equity = assets – liabilities)
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