Chapter 7

Question 1

This is the sorting of assets, liabilities, equity, income, and expenses on the basis of shared or similar characteristics.

Answer 1

Classification

Question 2

These are classified as components of proft or loss and components of other comprehensive income.

Answer 2

Income and expenses

Question 3

This is the adding together of assets, liabilities, equity, income, and expenses that have similar or shared characand are included in the same classification.

Answer 3

Aggregation

Question 4

What are the 2 approaches in determining the financial performance of an entity?

Answer 4

Transaction approach
Capital Maintenance Approach

Question 5

This approach is the traditional preparation of an income statement.

Answer 5

Transaction approach

Question 6

This approach means that net income occurs only after the capital used from the beginning if the perood is maintained.

Answer 6

Capital Maintenance Approach

Question 7

This is an erosion of the capital invested in the entity.

Answer 7

Return of Capital

Question 8

This is the monetary amount of the net assets contributed by shareholders and the amount of the increase in net assets resulting from earnings retained by the entity.

Answer 8

Financial Capital

Question 9

What type of cost is financial capital bases on?

Answer 9

Historical Cost

Question 10

This is the quantitative measure of the physical prodctive capacity to produce goods and services.

Answer 10

Physical Capacity

Question 11

What type of cost is physical capital based on?

Answer 11

Current cost