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ACCA Applied Knowledge · Financial Accounting · The main elements of financial statements

Under the IFRS Conceptual Framework, which of the following best defines an asset?

An asset is a present economic resource controlled by the entity as a result of past events. The definition rests on control and past events, not on legal title or cash payment, and it differs from a liability or equity.

  1. AA present economic resource controlled by the entity as a result of past eventsCorrect
  2. BA present obligation of the entity to transfer an economic resource as a result of past events
  3. CA resource that the entity has legally purchased and paid for in cash
  4. DThe residual interest in the entity after deducting all liabilities

Explanation

The Conceptual Framework defines an asset as a present economic resource controlled by the entity as a result of past events. Option B describes a liability and option D describes equity. Legal ownership or cash payment is not required, so option C is too narrow.

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