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CA Foundation · Accounting · Theoretical Framework

Under the Conceptual Framework, which of the following is the definition of an 'asset'?

An asset is a present economic resource controlled by the entity as a result of past events. The obligation to transfer a resource is a liability, and the residual interest after deducting liabilities is equity. Expected future events alone do not create assets.

  1. AA present economic resource controlled by the entity as a result of past eventsCorrect
  2. BAn obligation of the entity to transfer an economic resource as a result of past events
  3. CThe residual interest in the entity after deducting all liabilities
  4. DA future event expected to bring profit to the owners of the entity

Explanation

An asset is a present economic resource controlled by the entity as a result of past events. The second option describes a liability, and the third describes equity (the residual interest). A mere expected future event is not an asset because there is no present resource controlled.

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