Kakan er sæt, en ég borða bara smá.

-n is the Icelandic definite article attached to the noun.

• kaka = a cake / cake (indefinite)
• kakan = the cake (definite)
  For feminine singular nouns like kaka, the nominative definite ending is typically -in → kaka + -in = kakan.

Adjectives agree with the noun they describe in gender, number, and case. Here the adjective is used predicatively (after er) and it still agrees with the subject:

• kakan is feminine, singular, nominative
• so the adjective is sæt (feminine sg. nominative)

For comparison (same adjective, different nouns):

• Kötturinn er sætur (The cat is sweet/cute) — masculine
• Barnið er sætt (The child is sweet/cute) — neuter
• Kökurnar eru sætar (The cakes are sweet/cute) — plural feminine

In Icelandic, you normally use a comma before en when it joins two independent clauses:

• Kakan er sæt, (clause 1: subject + verb + complement)
• en ég borða bara smá. (clause 2: subject + verb + adverb + object/amount)

So the comma is standard punctuation here.

• og = and (adds/continues)
• en = but (contrasts)

So en signals a contrast: the cake is sweet, but you only eat a little.

Both can be correct, but they emphasize different things:

• ég borða = simple present; can mean I eat (habit) or I’m eating (often used for what you’re doing right now, depending on context)
• ég er að borða = explicitly progressive-like: I am in the process of eating

In a sentence like this, ég borða bara smá is a natural, simple way to express what you do (or will do) with the cake.

bara means only/just and it limits the amount/action. Its placement is fairly flexible, but it commonly appears right before what it’s limiting or in the middle field of the clause:

• ég borða bara smá = I eat only a little (common)
• ég borða smá bara can sound odd in many contexts (often less natural)
• bara smá works as a phrase: bara smá! = just a little!

smá can function on its own as an elliptical amount expression meaning a little (bit). The noun (like bita “bite” or köku “(of) cake”) is understood from context.

You could also say more explicitly, for example:

• ég borða bara smá af köku = I only eat a little of (the) cake
  But the short version with smá alone is very common.

It’s often treated like an indeclinable quantifier/amount word meaning a little. It can also be used like an adjective before a noun:

• smá kaka = a small cake / a little cake (context-dependent)
• smá sykur = a little sugar

In ég borða bara smá, it’s being used as an amount expression.

A few useful notes for a learner:

• á in kakan is not present; it’s plain a sounds (short vowels): ka-kan (stress on first syllable)
• æ in sæt is like English eye in many accents (approx.): sייט
• ég ends with a “soft” sound; the g is not a hard English g (often more like a y/gh sound depending on accent)
• borða has ð, which is like the th in this (voiced) for many speakers: bor-tha (approx.)