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Accounting: What is an Asset?

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Questions and Answers

What is the primary characterization of an asset?

A resource that is controlled by an external entity

A resource that has no future economic benefits

A resource that has no historical significance

A resource that is expected to generate future economic benefits (correct)

What is implied by 'past events' in the context of an asset?

Future transactions or events

Ongoing events or activities

Current events or activities

Historical events or transactions that have already occurred (correct)

What is the primary characteristic of an asset in terms of control?

Shared control between entities

Controlled by an external entity

No control whatsoever

Controlled by the entity itself (correct)

What is the expected outcome of possessing an asset?

Generating future economic benefits Signup and view all the answers

What is the primary distinction between an asset and a liability?

Assets are expected to generate benefits, while liabilities are expected to incur expenses Signup and view all the answers

Where is income received in advance typically presented in the financial statements?

Statement of financial position Signup and view all the answers

What is the classification of income received in advance in the financial statements?

Liability Signup and view all the answers

Why is income received in advance considered a liability?

Because it is a payment received before the goods or services have been delivered Signup and view all the answers

What is the impact on a company's financial statements when it receives income in advance?

Assets increase and liabilities increase Signup and view all the answers

What is the accounting treatment for income received in advance?

Defer it until the goods or services are delivered Signup and view all the answers