Which of the Following Is Not True Regarding the Asset-Liability

question 36

Multiple Choice

Which of the following is not true regarding the asset-liability approach to defining accounting elements?

• A)The asset-liability approach focuses on the measurement of net assets.
• B)The asset-liability approach is arguably superior to the revenue-expense approach.
• C)The asset-liability approach is the basic orientation of current financial reporting practices.
• D)SFAS No. 109 uses the asset-liability approach by focusing income tax accounting on the recognition of tax assets and liabilities.

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Definitions:

Goodwill Method

An accounting method used to evaluate the excess of purchase price over the fair value of net identifiable assets acquired in a business combination.

Journal Entries

Recorded transactions in the accounting records of a business that are used to transfer amounts from one account to another, ensuring the ledger remains in balance.

Fair Value

Fair value is an estimate of the market value of an asset, based on its current price in a fair and open market transaction.

Bonus Method

A method in accounting for partnerships where a new partner's investment is recorded at an amount that is different from the stated value of the partnership's net assets, affecting the capital accounts of the existing partners.