Financial Statement Recognition
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Questions and Answers

Which of the following is a basis for recognising assets, liabilities, equity, income or expense in financial statements?

  • Current value (correct)
  • Realisable value
  • Nominal value
  • Purchasing power value

    • What is the main aim of presentation and disclosure requirements in financial statements?

  • To maintain capital
  • To increase profits
  • To reduce expenses
  • To provide a tool for effective communication (correct)

    • What is the difference between financial capital maintenance and physical capital maintenance?

  • Physical capital maintenance is concerned with how an entity defines the capital that it seeks to maintain while financial capital maintenance is not
  • Financial capital maintenance treats the effects of increases in prices of assets and liabilities while physical capital maintenance does not
  • Financial capital maintenance requires the adoption of current cost basis of measurement while physical capital maintenance does not
  • Financial capital maintenance is measured in nominal monetary units while physical capital maintenance is measured in units of constant purchasing power (correct)

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