All financial statements consist of classes or categories known as elements . There are ten elements: assets, liabilities, equity, contributed capital, revenue, expenses, distributions, net income, gains, and losses (which will be explained later in this or further chapters).

Assets are economic recourses of a business used to accomplish its main goal, ie, increase owners' wealth.

To be formally recognized as an asset, the following two conditions must be met:

For example, if a company has purchased a piece of equipment and uses it in generating profits, it is considered as an asset.

However, if the company just considers buying new equipment, it can't be deemed or recorded as an asset.