In a Standard Statement of Management Responsibility for the Financial

question 8

Multiple Choice

In a standard Statement of Management Responsibility for the Financial Statements, management indicates:

• A) that it has audited the financial statements found in the annual report
• B) it is responsible for the financial statements and all related financial information contained in the annual report
• C) that no amounts found in the financial statements are based either on estimates or judgments
• D) that the company is fiscally sound

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Definitions:

Capital Lease

A lease agreement that is classified as a purchase by the lessee for accounting purposes because it meets certain criteria, such as transfer of ownership by the end of the lease term.

Operating Lease

A lease agreement for property or equipment that is considered a rental and is not recorded as an asset on the company's balance sheet.

GAAP

Generally Accepted Accounting Principles, a collection of commonly followed accounting rules and standards for financial reporting in the United States.

Lease Classification

The process of categorizing leases as either operating leases or finance (capital) leases based on criteria that affect the lessee's financial statements.