Recognising your assets, liabilities, income and expenses

Hello readers, so today I will be writing about assets, liabilities, income and expenses. The IFRS framework states that before any item can be identified, it must meet the definition of an asset, liabilities, income and expenses. You must also have enough proof that a change as occurred in your assets or liability. It must also be measured in monetary terms. 

There are some situations whereby you can recognise an income even when you have not received it. For example it could take a project a long time to complete, income should be recognised when you execute a part of the project. The further you execute the project the more income you can recognise. I will advise you not to wait till the end of the project before you start asking for your money, read this article.

According to the IFRS " an asset is a resource controlled by an entity, as a result of a past event from which future economic benefit are expected to flow to the entity". As such,  an item is  recognised as an asset when it is likely that a future economic benefit will flow into your organisation as  a result of controlling the item. You do not need to own an item before you can call it your asset, you just have be in control of the item (nothing can happen without Allah's Permission). It must be able to be measured reliably in monetary terms.

According to IFRS "a liability is a present obligation of the entity arising from past event, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefit. As such, a liability should only be recognised when your company has an obligation to give out economic benefit due to a past event. It must also be able to be measured reliably in monetary terms.

Income is an inflow of economic benefit as a result of an increase in an asset or decrease in liability. It can only be recognised when the above occurs and it can be measured reliably in monetary terms. The inflow of economic benefit happens during the day to day activities of the organisation.

An expense on the other hand, is an outflow of economic benefit as a result of an increase in liability or a decrease in asset. Thus, an expense can be recognised when the above happens and it can be measured reliably in monetary terms. The outflow of economic benefit also happens during the day to day activities of an organisation. 

That is all for today. Thank you for reading this article. Keep checking out my blog regularly. Cheers!