About Lesson
LOS A requires us to:
describe the elements of the balance sheet: assets, liabilities, and equity.
As reflected in the basic equation of the balance sheet, it has three major elements. They are:
a. Assets. Assets are:
i. the owned resources of an entity that are a result of past events, and
ii. we can expect inflows of economic benefits in the future due to their ownership.
b. Liabilities. Liabilities are:
i. obligations resulting from past events, and
ii. we can expect future outflow economic benefits because of their ownership.
c. Equity. It is the residual interest in the assets after deducting the liabilities held by the shareowners. It reflects the worth of their investments held in the company. Usually, the figure of equity is derived by subtracting the value of liability from the assets.