Financial Instruments

 What are financial instruments?

Any contract that gives rise to a financial asset for one entity and a fin liability for
another

 What are the two classifications of financial instruments?

o Financial Asset
o Financial Liabilities
 What is a financial asset?

Providing finance

o Cash
o Equity instrument of another entity
o Right to receive cash from another entity
o Contractual right to exchange fin instruments with another entity in favorable
conditions
 What is a financial liability?

Obtain finance

Delivering cash to another entity

Exchange fin instruments with another entity under unfavorable conditions

 What is an equity instrument?

Obtain finance

Any contract that evidences a residual interest in the assets of an entity after deducting
all liabilities

 What are ordinary shares classified as?

Equity

 What are loans and debentures classified as?

Financial liability

 What are financial instruments?

Any contract that gives rise to a financial asset for one entity and a fin liability for
another
 What are the two classifications of financial instruments?
o Financial Asset
o Financial Liabilities
 What is a financial asset?

Providing finance

o Cash
o Equity instrument of another entity
o Right to receive cash from another entity
o Contractual right to exchange fin instruments with another entity in favorable
conditions
 What is a financial liability?

Obtain finance

Delivering cash to another entity

Exchange fin instruments with another entity under unfavorable conditions

 What is an equity instrument?

Obtain finance

Any contract that evidences a residual interest in the assets of an entity after deducting
all liabilities