Chapter 6- Compound Financial Instruments (unfinished)

It is any conrtract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity.

• There must be a contract
• There are at least two parties to the contract
• The contract shall give rise to financial asset of one party and financial liability or equity instrument of another party

• Cash in the form of notes and coins
• Cash in the the form of checks
• Cash in bank
• Trade accountss
• Notes and loan
• Debt securities
• Equity securities

• It is any liability that is a contractual obligation:
• To deliver cash or other financial asset to another entity
• To exchange financial instruments with another entity under conditions that are potebtially unfavorable

• Trade accounts payable
• Notes payable
• Loans payable
• Bonds payable

Because the outflow of economic benefits associated with them is the dfelivery of goods and services rather than the contractual obligation to pay cash or another financial asset.

Because the obligations do not arise from contracts

It is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.