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?

<p>Generating future economic benefits (B)</p> Signup and view all the answers

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

<p>Assets are expected to generate benefits, while liabilities are expected to incur expenses (A)</p> Signup and view all the answers

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

<p>Statement of financial position (C)</p> Signup and view all the answers

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

<p>Liability (B)</p> Signup and view all the answers

Why is income received in advance considered a liability?

<p>Because it is a payment received before the goods or services have been delivered (C)</p> Signup and view all the answers

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

<p>Assets increase and liabilities increase (D)</p> Signup and view all the answers

What is the accounting treatment for income received in advance?

<p>Defer it until the goods or services are delivered (C)</p> Signup and view all the answers

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