Which of the Following Is an Assumption Made in the Preparation

question 131

Multiple Choice

Which of the following is an assumption made in the preparation of the financial statements?

• A)Financial statements are prepared for a specific entity that is distinct from the entity's owners.
• B)The current market value is assumed to be more relevant than the original cost paid.
• C)The preparation of financial statements for a specific time period assumes that the balance sheet covers a designated period of time.
• D)Financial statements are prepared assuming that inflation has a distinct effect on the monetary unit.

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Definitions:

COGS

Stands for Cost of Goods Sold, which represents the direct costs attributable to the production of the goods sold by a company, including materials and labor.

Cash Cycle

The cash cycle measures the time it takes for a company to convert its inventory and other resources into cash flows from sales, indicating the efficiency of a company's cash management.

First Quarter

Typically refers to the first three months of a financial year, used as a reporting period by businesses and other organizations.

Operating Cycle

The duration between a company's purchase of inventory and the receipt of cash from accounts receivable, reflecting the efficiency of a company's cash flow.