Preparing financial statements requires: A. judgement and capital. B. judgement and discretion. C. money and capital. D. money and discretion.
Question
Preparing financial statements requires: A. judgement and capital. B. judgement and discretion. C. money and capital. D. money and discretion.
Solution
The correct answer is B. Preparing financial statements requires judgement and discretion. This is because financial statements often involve making estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Therefore, judgement is needed to determine the most appropriate figures to use. Discretion is also needed to decide how to present and classify the different items in the financial statements.
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