ACCA Applied Knowledge · Financial Accounting · The main elements of financial statements
Which statement about equity under the Conceptual Framework is correct?
Equity is the residual interest in the entity's assets after deducting all its liabilities. It includes share capital, retained earnings and other reserves, and it is not the same as market value of shares or cash available for distribution.
- AEquity is the residual interest in the assets of the entity after deducting all its liabilitiesCorrect
- BEquity is the amount of cash the entity could distribute to owners immediately
- CEquity is the total of share capital only, excluding retained earnings
- DEquity is the market value of the entity's shares at the reporting date
Explanation
Equity is defined as the residual interest in assets after deducting liabilities. It includes retained earnings and reserves, not only share capital, and is not measured by market capitalisation or distributable cash.
Did you get it right without looking?
One question tells you little. A timed set on The main elements of financial statements shows your real accuracy, how long you take and where you lose marks.
More The main elements of financial statements questions
- Which of the following is a liability of Kestrel Co at the reporting date?
- Which of the following items would NOT meet the Conceptual Framework definition of a liability at the reporting date?
- Which of the following items would be presented within equity in a company's statement of financial position?
- Dalton Co had opening equity of $200,000 and closing equity of $245,000. During the year the owners introduced $30,000 of new capital and Da…
- At 31 December, Orchid Co has total assets of $480,000 and total liabilities of $310,000. During the year the owners contributed $20,000 of …
- Kestrel Co buys a machine on 1 January for $80,000 cash. Which of the following is the correct double entry on initial recognition of the ma…