Which of the following statements best describes the reporting process for profit seeking and governmental entities?
A) In profit-seeking enterprises the measurement focus is on the flow of all economic resources of the firm, whereas the focus for governmental funds is on current financial resources
B) In profit-seeking enterprises the measurement focus is on the flow of current financial resources, whereas the focus for government funds is on all economic resources.
C) Both Profit-seeking enterprises and governmental entities have an objective to measure profitability.
D) Both Profit-seeking enterprises and governmental entities use the accrual or cash basis of accounting to record and report transactions.

Question

Quizplus · Accepted Answer

The reporting process for profit-seeking and governmental entities differs in terms of the measurement focus. Profit-seeking enterprises focus on the flow of all economic resources, while the focus for governmental funds is on current financial resources. Option B is incorrect because the measurement focus for profit-seeking enterprises is not just limited to current financial resources. Option C is incorrect because while both entities may have objectives to measure profitability, it is not the only focus of their reporting. Option D is incorrect because while they may use accrual or cash basis of accounting, this is not the primary differentiating factor in their reporting processes.

Which of the Following Statements Best Describes the Reporting Process