Which of the Following Statements Relating to the Role of Professional

question 144

Multiple Choice

Which of the following statements relating to the role of professional judgment in the financial reporting process are valid?

• A) Different accountants may evaluate similar situations differently.
• B) The determination of which items should be disclosed in notes to financial statements requires professional judgment.
• C) Once a complete list of generally accepted accounting principles is prepared, judgment need no longer enter into the financial reporting process.
• D) The possibility always exists that professional judgment later may prove to have been incorrect.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to fund operations.

Current Ratio

A financial metric assessing a firm's capability to meet its short-term debts, determined by dividing its current assets by its current liabilities.

Days' Sales

The metric used to evaluate how efficiently a company can convert its inventory into sales, often expressed as days' sales in inventory.

Receivables

All money claims against other entities, including people, business firms, and other organizations.