Question

Define the Elements of Financial Statements of Business Enterprises.

Answer 1

The elements of financial statements are general items which are included within the statements. These elements are described below.

1. Asset - Assets are items which are useful or valuable and can make some benefit in the future period. Examples are cash in hand, account recievable, plant and machinery etc.

2Liabilities - These are obligations payable to another entity or individual. Examples are accounts payable, taxes payable, and wages payable. For liabilities we have an obligation to mske payments to others.

3. Equity - Equity is the amount invested by companies sharehokders or owners. This is the value of shares company issued.

4. Revenue - Revenues are the earnings of the company through the selling. This can be an increase inasset or decrease in liablitiy. This revenue is generated through the sales.

5. Expenses - When the company process is happening there will be so many expenses like direct and indirect expenses. This can be considered as the reduction of value of earnings or assets. For example depreciation is an expense and it will reduce the value of some fixed asset.

These are the 5 elements of financial statements.

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