Case

Recording transactions in the accounting system requires knowledge of the important characteristics of the elements of financial statements, such as assets and liabilities. In addition, accountants must understand the inherent uncertainty in accounting measures and distinctions between related accounting concepts that are important in evaluating the effects of transactions on the financial statements.

Instructions

Access the Conceptual Framework at the IFRS website (you may register for free IFRS access at this site). When you have accessed the document, you can use the search tool in your Internet browser to respond to the following items. (Provide paragraph citations.)

a. Provide the definition of an asset and discuss how the economic benefits embodied in an asset might flow to a company.

b. Provide the definition of a liability and discuss how a company might satisfy a liability.

c. What is “accrual basis”? How do adjusting entries illustrate application of the accrual basis?