Capital Concepts and Financial Statements Quiz

Which concept of capital should be adopted if the users of financial statements are primarily concerned with the maintenance of nominal invested capital or the purchasing power of invested capital?

What is the main concern of users if a physical concept of capital is chosen?

What are the two concepts of capital maintenance mentioned in the text?

According to the text, which concept of capital maintenance requires the adoption of the current cost basis of measurement?

Under the concept of financial capital maintenance, how is profit defined when capital is defined in terms of nominal monetary units?

According to the text, under the concept of physical capital maintenance, how are price changes affecting the assets and liabilities of the entity treated?

According to the text, what does profit represent under the concept of financial capital maintenance when capital is defined in terms of constant purchasing power units?

True or false: Under a financial concept of capital, capital is synonymous with the productive capacity of the entity based on units of output per day.

True or false: The selection of the appropriate concept of capital by an entity should be based on the needs of the users of its financial statements.

True or false: Financial capital maintenance is measured in either nominal monetary units or units of constant purchasing power.

True or false: The concept of capital maintenance provides the point of reference by which profit is measured.

True or false: Under the physical capital maintenance concept, profit represents the increase in physical productive capacity over the period.

True or false: The financial capital maintenance concept requires the use of a specific basis of measurement.

True or false: According to the text, profit under the concept of financial capital maintenance is defined as the increase in invested purchasing power over the period.