Representational Faithfulness Is a Relationship Between the Reported Accounting Measurements

question 8

Multiple Choice

Representational faithfulness is a relationship between the reported accounting measurements or descriptions and the economic resources, obligations, and the transactions and events causing changes in these items.This is important because the

• A)bias associated with financial measurements can be reduced
• B)validity of accounting data is an important economic resource
• C)accounting information is relevant for all decisions
• D)financial information is faithfully reported in the accounting records

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Definitions:

Assets

Resources owned or controlled by a person or company, expected to bring future economic benefits.

Credits

Accounting entries that increase liabilities or equity on the balance sheet, or decrease an asset or expense account on the income statement.

Dividends Accounts

Dividends Accounts represent the financial accounts used by a company to record the dividends paid out to shareholders, reflecting the distribution of earnings.

Liabilities

Liabilities are financial obligations or debts that a company owes to others, which must be settled over time through the transfer of money, goods, or services.