Winston, a Young Accountant Has Determined That the Definition of an Asset

question 20

Multiple Choice

Winston, a young accountant has determined that the definition of an asset as been satisfied for an item.He states that the item can now be recognised in the financial statements of the relevant entity.Winston's statement is:

• A)Incorrect, because the recognition criteria also have to be satisfied
• B)Incorrect, because control over the future benefits of the asset has to be determined beyond reasonable doubt first
• C)Correct, because once the definition is satisfied the legal enforceability of the asset is satisfied an this automatically satisfies the recognition criteria
• D)Correct, because once the definition is satisfied the legal enforceability and tangibility of the asset are established, which automatically satisfies the recognition criteria

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Definitions:

Direct Labor Budget

A financial plan that estimates the cost of the direct labor required to meet production needs, including wages of workers who are directly involved in the manufacturing of goods.

Cash Budget

A forecast of cash inflows and outflows over a specific period, used to manage liquidity and ensure sufficient cash is available for operations.

Operating Budgets

Detailed projections of income and expenses related to a company's operational activities for a specific period, typically one year.

Budgeted Balance Sheet

A budgeted balance sheet forecasts a company's financial position at a future date, including assets, liabilities, and shareholders' equity, based on projected financial activities.