General Objectives of Financial Statements

Play an AI-generated podcast conversation about this lesson

What is the main purpose of financial statements?

To provide information about economic resources, claims, and changes in economic resources and claims. (correct)
To assess future market trends.
To provide information about the company's marketing strategies.
To provide information about the company's human resources.

Which statement provides information about the assets, liabilities, equity, income, and expenses of both the parent and its subsidiaries as a single reporting entity?

Statement of financial position (correct)
Statement of cash flows
Statement of changes in equity
Statement of income

What type of financial statements are designed to provide information about the parent’s assets, liabilities, equity, income, and expenses and not about those of the subsidiaries?

Unconsolidated financial statements (correct)
Both a and c
Combined financial statements
Consolidated financial statements

What do combined financial statements provide information about?

Assets, liabilities, equity, income, and expenses of two or more entities not linked with parent and subsidiary relationships. (B) Signup and view all the answers

What is a reporting entity?

An entity that chooses to prepare financial statements (D) Signup and view all the answers

When must financial statements be prepared?

On an annual basis (A) Signup and view all the answers

What is the 'going concern' assumption in accounting?

The accounting entity is viewed as continuing in operations indefinitely (D) Signup and view all the answers

How are assets typically recorded under the 'going concern' assumption?

At cost (B) Signup and view all the answers

Which financial statement provides information about changes in economic resources and claims?

Statement of changes in equity (B) Signup and view all the answers

In consolidated financial statements, who exercises control over the subsidiaries?

The parent (C) Signup and view all the answers

What type of financial statements provide information about two or more entities not linked with parent and subsidiary relationships?

Combined financial statements (B) Signup and view all the answers

What do unconsolidated financial statements provide information about?

Assets, liabilities, equity, income, and expenses of the subsidiaries only (D) Signup and view all the answers

What is the primary purpose of accounting assumptions or accounting postulates?

To provide a foundation for the accounting process and enhance the understanding and usefulness of financial statements (B) Signup and view all the answers

In the absence of evidence to the contrary, how is the accounting entity viewed under the 'going concern' assumption?

As continuing in operations indefinitely (D) Signup and view all the answers

When is it necessary to include information about transactions and events that occurred after the end of the reporting period in financial statements?

If the information is necessary to meet the general objective of financial statements (C) Signup and view all the answers

Under the 'accounting entity' assumption, what is the relationship between the entity and its owners, managers, and employees?

They are viewed as separate from the entity (D) Signup and view all the answers

What type of entities can be considered a reporting entity?

Any entity that chooses to prepare financial statements (B) Signup and view all the answers

In what manner are assets normally recorded under the 'going concern' assumption?

At historical cost (B) Signup and view all the answers