Which of the following best explains what recognition means in financial reporting?
A)Recognition is the process of reporting an item that is due within 12 months in the current section of the balance sheet.
B)Recognition is the process of reporting an item in the notes to the financial statements.
C)Recognition is the process of presenting an item in the financial statements.
D)Recognition refers to the choice between using fair value and historical cost in the financial statements.

Question

Quizplus · Accepted Answer

Recognition refers to the process of presenting an item in the financial statements. This means including it in the balance sheet, income statement, or statement of cash flows. It is an important step in financial reporting as it allows stakeholders to see the financial impact of certain transactions or events. Option A is incorrect as it refers specifically to the classification of a current liability on the balance sheet. Option B is incorrect as notes to the financial statements provide additional information but do not necessarily involve recognition. Option D is incorrect as fair value and historical cost are accounting methods, not the process of recognition itself.

Which of the Following Best Explains What Recognition Means in Financial