What Are the Two Criteria, Specified in the Conceptual Framework

question 18

Multiple Choice

What are the two criteria, specified in the Conceptual Framework, that must be met before a liability can be recognised in the accounting records?

• A) It must be probable that any future sacrifices associated with the item will flow from the entity and the liability must have a cost or value that can be measured with reliability.
• B) It must be probable that a future sacrifice of economic resources will be required and the liability must be beyond a reasonable doubt.
• C) The liability must be beyond a reasonable doubt and the amount of the liability must be able to be recognised reliably.
• D) There must have been a past event and there must be a present obligation

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Definitions:

Pareto Optimum

A distribution of resources in which it is not feasible to rearrange in a way that improves one person's situation without detrimentally affecting at least another individual's standing.

Utility Possibilities Frontier

A graph that shows the maximum amount of utility that can be achieved by different individuals or groups from a fixed set of resources.

Production Possibilities

A curve or frontier that illustrates the maximum feasible amounts of two commodities that can be produced with available resources and technology.

Competitive Equilibrium

A state in a market where supply equals demand, and no economic agent has the incentive to change their behavior, leading to an efficient allocation of resources.