German Accounting Standards Have a "Reverse Authoritative Principle

question 42

Multiple Choice

German accounting standards have a "reverse authoritative principle." What does this mean?

• A)Reversing entries must be made before financial reports can be issued to the public.
• B)Only tax deductible expenses can be used for determining accounting income.
• C)Financial statements are the basis for taxation.
• D)None of the above

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Definitions:

Closing Entries

Entries recorded at the close of an accounting period to move balances from temporary accounts to permanent ones.

Owner's Equity Account

An account on a company's balance sheet that represents the total amount invested by the owners plus any retained earnings or losses.

Real Accounts

Accounts related to assets, liabilities, and equity that are not closed at the end of the accounting period and are carried forward to the next period.

Nominal Accounts

Accounts that are used in accounting to record expenses, incomes, losses, and gains; these accounts are closed at the end of the accounting period.