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Liability
What is a Liability
o A present obligation of the entity arising from past events, the settlement of which is
expected to result in an outflow from the entity of resources embodying economic benefits
Contingent liability
o They are not entered into the accounts and only disclosed as notes to the accounts
o An obligation that will occur in the future only if some particular event occurs
What is equity
o Owners Equity is a residual interest in the assets of an entity after deducting its liabilities
Leasing
Finance lease
o The lease has the right of purchase at the end of the lease
o The lessee has control of the leased asset and is effectively financing the acquisition of the
asset via the leased agreement
Operating lease
o Its purpose is to obtain the use of the asset for a short period of time
o Not to gain ownership or long-term use