Question

If you were to change the underlying capital maintenence concept used in financial statements, how would...

If you were to change the underlying capital maintenence concept used in financial statements, how would the income statements differ?

Homework Answers

Answer #1

As per capital maintenance concept, profit should be recognized only when business has at least maintained the amount of its net assets during an accounting period.

In other words, that profit must result in the increase in net assets during a period.

But in Income measurement approach, income/profit is measured based on transactions.

So, to change financial statement from capital maintaince concept to income measurement approach, it must be prepared based on transactions occured during the period and removing components showing -

1. Changes occured in net assets value like profit on revaluation of inventory, fixed assets, investments, long term liabilities etc. at fair market value,

2. Change in currents assets, current liabilities.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
How would an experiment change if a variable for the introspection were gender? Do you think...
How would an experiment change if a variable for the introspection were gender? Do you think that men and women differ in introspection? Why is it important that we are aware of both Thitchener and Wudt’s approach to introspection?
How would you define the concept of "passive income"? Any examples you can provide? Would you...
How would you define the concept of "passive income"? Any examples you can provide? Would you be subject to passive income rules? I have already used Rental proferties for one example of passive income.
how would estimated average cost of capital(5%) differ if a recession were to occur?
how would estimated average cost of capital(5%) differ if a recession were to occur?
How would the distribution of income change if Social Security were privatized?
How would the distribution of income change if Social Security were privatized?
7) What are common-size financial statements and how are they used?
7) What are common-size financial statements and how are they used?
1. What are examples of pro forma financial statements? How are they used? 2. Discuss the...
1. What are examples of pro forma financial statements? How are they used? 2. Discuss the differences between GAAP financial statements and pro forma statements?
Which of the following statements about the financial statements is correct? The “change in cash” reported...
Which of the following statements about the financial statements is correct? The “change in cash” reported on the statement of cash flows is also reported on the statement of retained earnings. The statement of cash flows and income statement are for a period of time while the balance sheet is at a point in time. The statement of cash flows and income statement are at a point of time while the balance sheet is for a period of time. None...
How would the financial statements be different in a leasing situation (for both operating leases and...
How would the financial statements be different in a leasing situation (for both operating leases and capital leases) for the lessee? What about the lessor (including all the types)? What disclosures should be made by lessees and lessors related to future lease payments?
Consistency Concept says you must use the same (inventory costing) method so financial statements can be...
Consistency Concept says you must use the same (inventory costing) method so financial statements can be compared from one period to the next period. Group of answer choices True or false
The following items were taken from the financial statements of Tiger Inc: a. Income tax expense...
The following items were taken from the financial statements of Tiger Inc: a. Income tax expense b. Interest expense c. Service revenue d. Accounts receivable e. Retained earnings f. Inventory g. Accounts payable h. Contributed capital i. Dividends j. Outstanding rent Required : Identify whether each item would appear on the Balance Sheet, the Income Statement or the Statement of Retained Earnings.