In accordance with AASB framework which of the following accounts are expenses?
A)Dividends paid.
B)Provision for warranties.
C)Entity dumps pollutants in a river adjacent to its factory.
D)All of the given answers.
E)None of the given answers.

Question

Quizplus · Accepted Answer

In accordance with the AASB (Australian Accounting Standards Board) framework, expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.
Let's evaluate the given options:
1. Dividends paid: Dividends paid are not considered an expense. Instead, they are distributions to shareholders and are accounted for as a reduction in equity, not as an expense in the income statement.
2. Provision for warranties: Provisions for warranties are indeed considered an expense. They represent an estimate of future costs that the entity will incur as part of its warranty obligations to customers. This is recognized in the income statement as an expense and simultaneously as a liability on the balance sheet.
3. Entity dumps pollutants in a river adjacent to its factory: If the entity incurs a cost for the clean-up or any fines or penalties due to the pollution, these costs would be considered expenses. However, the act of dumping pollutants itself is not an expense; it's the associated costs that are recognized as expenses.
4. All of the given answers: Since dividends paid are not considered an expense, this option is incorrect.
5. None of the given answers: This option is incorrect because the provision for warranties is an expense.
Based on the AASB framework, the correct answer is:
2. Provision for warranties.
This is the account that is classified as an expense in accordance with the AASB framework.

In Accordance with AASB Framework Which of the Following Accounts