DFS Definitions

NickyW

Is it just me or my age but I am having great difficulty in remembering the definitions for assets, liabilities etc.
Anyone got any tips in trying to remember them?
Nicky

Bluewednesday

use index cards as a memory aide or stick them up in the kitchen on post it notes.

Rote learning the exact definition is the best thing as at this stage you obviously know what they are but need the best way of explaining it.

NickyW

In the definition for a liability -can anybody tell me what an 'entity of resources embodying economic benefits is'?

Nicky

Paul24

The present obligation (resulting from the past event) will result in resources embodying economic benefits to flow from the entity. I think thats the definition if I remember correctly.

Basically means what it says. Some point in the past the company has received a benefit be it capital or money from a loan, that will result in future cash flows from the entity, i.e; when you have to pay it back.

Steve Collings

The full definition of a liability as far as the IASB's Framework Document is concerned is:

"a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits".

"economic benefits" can be classed as cash or other assets.

"...resources embodying economic benefits" is the same as saying the entity will settle its liabilities with cash or other assets of the entity.

Liabilities could be loans (as cited by Paul above) or as simple as trade payables.

Regards
Steve

NickyW

I get it now!! Thanks a lot - i find it difficult to learn things if I don't understand what they are saying!!!
Nicky