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Chapter 1

6.2 Definitions

Asset – ‘a resource owned or controlled by an entity as a result of
past events and from which future economic benefits are expected
to flow to the entity’ (Framework, Glossary)

Liability – ‘a present obligation arising from past events, the
settlement of which is expected to result in an outflow from the
entity of resources embodying economic benefits’ (Framework,
Glossary)

Capital/Equity – a special kind of liability due to the owner(s) and is ‘the
residual interest in the assets of the entity after deducting all its
liabilities’ (Framework, para 4.4)

Income – ‘increases in economic benefits during the accounting
period in the form of inflows or enhancements of assets or
decreases of liabilities that result in an increase in equity’
(Framework, Glossary)

Expense – ‘decreases in economic benefits during the accounting
period in the form of outflows or diminutions of assets or
increases of liabilities that result in a decrease in equity’
(Framework, Para 4.25)

Tutor notes guidance – discussion points

These definitions are fundamental to the students learning in this paper –
please ensure they are clear or the differences between each. Simplify the
definitions for students

Go through the classification of assets and liabilities as current and non-current-
refer to the Study Text for diagrams on classification if needed.

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