When an Entity Has a Legally Enforceable Right to Set

question 13

Multiple Choice

When an entity has a legally enforceable right to set off the recognised amounts of a financial asset and financial liability and it intends to settle on a net basis, it:

• A) can write off both the asset and the liability;
• B) may offset the financial asset and liability;
• C) is not entitled to offset the asset and liability;
• D) need not present the asset, the liability or the net amount in its financial statements.

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Definitions:

Net Income

The net income of a business following the subtraction of all costs, such as operating expenses and taxes, from its overall revenue.

Net Loss

The deficit that results when total expenses exceed total revenues in a specific accounting period, indicating a decrease in net assets.

Accounting Equation

A fundamental principle of accounting that states assets are equal to the sum of liabilities and stockholders' equity, expressed as Assets = Liabilities + Stockholders' Equity.

Landscaping Supplies

Various materials and tools used for garden and landscape design, maintenance, and construction.