The Disclosure of Accounting Policies, Is Important to Financial Statement

question 4

Multiple Choice

The disclosure of accounting policies, is important to financial statement readers in determining

• A)net income for the year.
• B)whether accounting policies are consistently applied from year to year.
• C)the value of obsolete items included in ending inventory.
• D)whether the working capital position is adequate for future operations.

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Definitions:

Income Statement Amounts

The monetary values of revenue, expenses, gains, and losses reported in the income statement.

Common-Size Percentages

Financial analysis tool that converts each line item of financial statements into a percentage of a common base figure to allow for easy comparison.

Balance Sheets

Financial statements that show a company's financial position, detailing assets, liabilities, and equity at a specific point in time.

Inventory Turnover

A ratio indicating how many times a company's inventory is sold and replaced over a period.