How Does an Accountant Decide on the Appropriate Method of Accounting

question 23

Multiple Choice

How does an accountant decide on the appropriate method of accounting for a business transaction?

• A)Evaluating if the particular method is consistent with the conceptual framework.
• B)Ensuring that the accounting method agrees with that selected by other companies.
• C)Evaluating whether the selected method differs from the underlying economics.
• D)Testing the selected method for numerical accuracy and consistency.

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Definitions:

Bailment

A legal relationship in common law where physical possession of personal property, or a chattel, is transferred from one person (the bailor) to another (the bailee) who subsequently has possession of the property.

Contract

A legally enforceable agreement between two or more parties that creates mutual obligations enforceable by law.

Gratuitous Bailment

A bailment where the bailee holds the bailed property without receiving compensation, doing it for the bailor's benefit only.

Legal Obligation

A duty enforced by law, requiring an entity or individual to follow or abstain from specific actions, subject to legal consequences for failure to comply.