One Recognised Approach to Reducing the Level of Debt That

question 3

Multiple Choice

One recognised approach to reducing the level of debt that has been adopted in the past was to:

• A) Attempt to report the debt as equity, often in the form of preference shares.
• B) Create reserves and draw on them later as a source of funding.
• C) Treat as many liabilities as possible as provisions.
• D) Record liabilities as an increase in cash and a decrease in revenues.
• E) None of the given answers.

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Definitions:

Matching Principle

An accounting principle that dictates expenses should be recognized in the same period as the revenues they helped generate.

Depletion

The accounting process of allocating the cost of natural resources over their productive life, used in industries like mining, timber, and oil extraction.

Estimated Lives

The expected period over which an asset is anticipated to be usable by the company, affecting depreciation and amortization calculations.

Salvage Values

The estimated residual value of an asset at the end of its useful life, determining its value when it can no longer be used for its primary purpose.