Which Statement Best Explains the Meaning of "Recognition" in Financial

question 9

Multiple Choice

Which statement best explains the meaning of "recognition" in financial reporting?

• A)Determining where items should be presented in the body of the financial statements.
• B)Presenting an item in the financial statements, rather than simply disclosing in the notes.
• C)Quantifying items so that they can be presented in the body of the financial statements.
• D)Presenting expenses in the same accounting period as the related revenues.

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Definitions:

Net Income

The total profit of a company after all expenses, including taxes and operating costs, are subtracted from total revenue.

Revenue

The income received by a company from its business activities, usually from the sale of goods and services to customers.

Expenses

Money spent or cost incurred in an entity's efforts to generate revenue, representing the cost of doing business.

Liability

An obligation of the company that arises from past transactions or events, leading to a probable future sacrifice of economic benefits.