Which Statement Is Correct About an Equity Instrument

question 79

Multiple Choice

Which statement is correct about an equity instrument?

• A)A contract whose value changes according to a specified variable, requires little or no initial investment and is settled at a future date.
• B)A contract that gives the holder the residual interest in an entity after deducting all of its liabilities.
• C)Any contract that entitles the holder to joint interest in an entity after deducting all of its liabilities, and is settled at a future date.
• D)Any contract that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity.

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Definitions:

Balance Sheet

A financial statement that provides a snapshot of a company's financial position, listing assets, liabilities, and equity at a specific point in time.

Accounting Equation

The foundational equation in accounting, articulated as Assets = Liabilities + Owner's Equity, representing the relationship between a company's resources and claims on those resources.

Profit

The financial gain calculated as the difference between revenue generated and expenses incurred by a business.

Assets and Liabilities

These represent a company's resources (assets) and obligations (liabilities).