In one sentenceContracts that create a financial asset for one party and a financial liability or equity instrument for another, such as receivables, financing, shares and sukuk.
Simply put
When you sell on credit you gain a financial asset (a right to cash), and the customer has a financial liability. The same goes for bank financing and investments in shares: all are financial instruments.
International standard IFRS 9 sets how they are measured, at amortized cost or at fair value, and requires an allowance for expected credit losses on receivables and financing granted.
Example
In an appliance store's statements: receivables and cash at the bank are financial assets, payables and bank financing are financial liabilities, while inventory and equipment are not financial instruments because they do not represent a contractual right to cash.
Don't confuse it with
AssetEvery financial instrument held as a receivable is an asset, but not every asset is a financial instrument: inventory and equipment are non-financial assets.