Which of the Following Is an Application of Conservatism

question 123

Multiple Choice

Which of the following is an application of conservatism?

• A) reporting inventory at the lower of cost or market
• B) reporting only material amounts in the financial statements
• C) reporting all relevant information in the financial statements
• D) using the same depreciation method from period to period

---

Definitions:

Cash Dividends

Payments made by a corporation to its shareholder members, usually in the form of cash from its current or retained earnings.

Operating Activities

Transactions and events that affect the net income of a business, involving the primary revenue-producing activities of the entity.

Indirect Method

A method used in cash flow statement preparation that starts with net income and adjusts for changes in balance sheet accounts to arrive at cash provided by operating activities.

Cash Dividends

Earnings distributed by a company to its investors, usually representing a portion of profits.