OR Define Equity, Income and Expenses as per 'Conceptual Framework' to Ind AS. How the information with respect to income and expenses helps the…

Definition of Equity Equity claims are claims on the residual interest in the assets of the entity after deducting all its liabilities. In other words, they are claims against the entity that do not meet the definition of a liability. Definition of Income Income is increases in assets, or decreases in liabilities, that result in increases in equity, other than those relating to contributions from holders of equity claims. Definition of Expenses Expenses are decreases in assets, or increases in liabilities, that result in decreases in equity, other than those relating to distributions to holders of equity claims. However, contributions from holders of equity claims are not income, and distributions to holders of equity claims are not expenses. How information with respect to income and expenses helps the users in understanding the financial statements? Income and expenses are the elements of financial statements that relate to an entity's financial performance. Users of financial statements need information about both an entity's financial position and its financial performance. Hence, although income and expenses are defined in terms of changes in assets and liabilities, information about income and expenses is just as important as information about assets and liabilities. Providing information separately about income and expenses with different characteristics can help users of financial statements to understand the entity's financial performance.