'A present obligation of an entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits', is the New Zealand Framework's definition of:
A) equity.
B) a liability.
C) an expense.
D) an asset.

Question

Quizplus · Accepted Answer

The definition provided is of a liability, which is a present obligation that an entity has to settle a past event and which is expected to result in the outflow of resources embodying economic benefits. Choice A is incorrect as equity refers to the residual interest in the assets of the entity after deducting liabilities. Choice C is incorrect as expenses are decreases in economic resources arising from ongoing operations. Choice D is incorrect as an asset is defined as a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

'A Present Obligation of an Entity Arising from Past Events