Day: January 10, 2024

Which of the following statements about accounting concepts and the characteristics of financial information is correct?

Select ONE answer:

1. Financial statements are required to give a true and fair view. These terms have clear definitions which are included in IAS1
2. The historical cost concept means that only items capable of being measured in monetary terms can be recognised in financial statements
3. It may sometimes be necessary to exclude information that is relevant and reliable from financial statements because it is too difficult for some users to understand
4. A specific disclosure requirement of an IAS1 need not be satisfied if the information is immaterial

Show your workings to arrive at your answer, and explain and justify your reasons:

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This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – While financial statements are required to give a true and fair view, these terms are not defined in statute, they tend to be determined in courts of law or on the facts (1). Recognition of items based on monetary amounts is the money measurement concept, not the historical cost concept (2). Items should not be excluded because of being difficult to understand (3).

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