Footnotes to a Company's Financial Statements Are Used to

question 8

Multiple Choice

Footnotes to a company's financial statements are used to

• A)More fully explain certain items in the financial statements.
• B)Reflect financial notes personalized by the company's executive team.
• C)Show the detail of salaries of every employee.
• D)Justify fraudulent business practices.

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Definitions:

Modified Cash Basis

An accounting method that combines elements of both cash and accrual accounting techniques.

Warranty Expense

Costs recognized by a company in accordance with its policy to repair or replace defective products during a warranty period.

Matching Concept

The Matching Concept in accounting states that expenses should be matched with the revenues that they helped to generate, in the same reporting period.

Uninsured Risk

Risk that has not been covered by an insurance policy, leaving the individual or business exposed to potential financial loss.