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.

Question

Quizplus · Accepted Answer

An equity instrument is a contract that gives the holder the residual interest in an entity after deducting all of its liabilities. This means that the holder of an equity instrument has a claim on the assets of the entity after all of its debts have been paid off. This is different from a debt instrument, which gives the holder a claim to a fixed amount of money and does not give the holder any ownership rights in the entity.

Which Statement Is Correct About an Equity Instrument