When Preparing Accounting Information, Understand That

question 91

Multiple Choice

When preparing accounting information, understand that:

• A) the auditors are primarily responsible for preparing the information.
• B) the cost of disclosure should not exceed the expected benefits to the users.
• C) accounting information can be produced quickly and inexpensively.
• D) all information must be disclosed for a complete understanding of the underlying economic facts.

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Definitions:

Initial Value Method

An accounting practice for investment recording wherein the investment is kept at its original cost on the balance sheet without adjusting for changes in net income of the investee.

Dividends

Earnings disbursed by a company to its shareholders, generally as a sharing of profits.

Net Income

The total profit or loss of a company after all revenues, costs, and expenses have been accounted for, typically reported at the bottom of the income statement.

Annual Amortization

The process of spreading out a loan or intangible asset's cost over its useful life, reflecting each year’s expense on the financial statements.