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.
Access the IASB Framework at the IASB website (http://eifrs.iasb.org/). (Click on the IFRS tab and then register for free eIFRS access if necessary.) When you have accessed the documents, 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?