Business activities resulting in transactions are reflected in the broad groupings of financial statement elements: Assets, Liabilities, Owners’ Equity, Revenue, and Expenses.1 In general terms, these elements can be defined as follows:
assets are the economic resources of a company;

liabilities are the creditors’ claims on the resources (assets) of a company;

owners’ equity is the residual claim on those resources (assets);

revenues are inflows of economic resources to the company;

expenses are outflows of economic resources or increases in liabilities.2

Accounts provide individual records of increases and decreases in a specific asset, liability, component of owners’ equity, revenue, or expense. The financial statements are constructed using these elements.