• 1 Marks

FA – Nov 2015 – L1 – SA – Q1 – Elements of Financial Statements

Defines the residual interest in the assets of an entity after deducting liabilities.

In accordance with Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), the residual interest in the assets of the entity after deducting all its liabilities is termed:
A. Liability
B. Provision
C. Equity
D. Assets
E. Reserves

C. Equity

Explanation:
Equity is the correct term for the residual interest in the assets of an entity after deducting liabilities, as per GAAP and IFRS. Equity represents ownership and is what remains after liabilities have been settled.

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