The primary reason for preparing a reconciliation between interest-bearing obligations outstanding during the year and interest expense in the financial statements is to
A) Evaluate internal control over securities.
B) Determine the validity of prepaid interest expense.
C) Ascertain the reasonableness of imputed interest.
D) Detect unrecorded liabilities.

Question

Quizplus · Accepted Answer

The primary purpose of preparing a reconciliation between interest-bearing obligations outstanding during the year and interest expense is to detect any unrecorded liabilities. This reconciliation helps in ensuring that all interest-bearing liabilities have been properly recorded in the financial statements, and any discrepancies can be identified and investigated. This is an important control procedure to ensure the completeness and accuracy of the financial statements. Choices A, B, and C are not the primary reasons for preparing this reconciliation.

The Primary Reason for Preparing a Reconciliation Between Interest-Bearing Obligations