The asset/liability approach emphasizes:
A)Whether amounts on the balance sheet meet the definitions of assets and liabilities.
B)A close relation between the balance sheet and the statement of cash flows.
C)The distinction between net assets and gross assets.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

The asset/liability approach emphasizes whether amounts on the balance sheet meet the definitions of assets and liabilities. This approach is concerned with ensuring that financial statements accurately reflect the economic resources the entity controls or owes, and therefore, it is essential to determine whether an item meets the definition of an asset or liability. While the balance sheet and statement of cash flows are related, the asset/liability approach does not necessarily focus on this relationship, and the distinction between net/gross assets is not particularly relevant to this approach.

The Asset/liability Approach Emphasizes