Provide Explanations for the following: Assets, Liabilities, Owner’s Equity & The Consistency Principle
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Answer:
• An asset is any resource owned by a business or an economic entity. It is anything that can be owned or controlled to produce value and that is held by an economic entity and that could produce positive economic value.
• A liability is something a person or company owes, usually a sum of money. ... The most common liabilities are usually the largest like accounts payable and bonds payable. Most companies will have these two line items on their balance sheet, as they are part of ongoing current and long-term operations.
• Equity is ownership of assets that may have debts or other liabilities attached to them. Equity is measured for accounting purposes by subtracting liabilities from the value of an asset.
• The consistency principle states that once you decide on an accounting method or principle to use in your business, you need to stick with and follow this method or principle consistently throughout your accounting periods.