In Relation to the Concept of Recognition of an Item

question 13

Multiple Choice

In relation to the concept of recognition of an item in the financial statements:

• A) Items of equity must satisfy both the probability and measurement criteria before they can be recognised.
• B) Assets can only be recognised where there is a high probability of future economic benefits flowing to the entity.
• C) Expenses are recognised when a decrease in a future economic benefit related to an increase in an asset or a decrease in a liability has arisen that can be measured reliably.
• D) For items to qualify for recognition in the financial statements as liabilities or income they must first satisfy the definition of an element, and then meet both the probability and measurement requirements in relation to recognition.

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Definitions:

Conscious Awareness

The state or quality of being aware of an external object or something within oneself, marked by perception and recognition of one's thoughts, feelings, and environment.

Heuristics

Simple, efficient rules, either hard-coded by evolutionary processes or learned, that help in making decisions, forming judgments, and solving problems.

Mental Shortcuts

Heuristic methods or simple strategies used by individuals to make decisions or judgments quickly without having to consider all possible variables, often resulting in cognitive biases.

Consolidating Memories

The process by which memories become stable in the brain; a phase where short-term memories are transformed into long-term memories.