To be recognized in the financial statements, an item must meet the definition of an element and be
A) measurable, understandable, and relevant
B) reliable, measurable, and realized
C) realized, relevant, and reliable
D) relevant, measurable, and faithfully represented

Question

Quizplus · Accepted Answer

According to the conceptual framework of accounting, to be recognized in the financial statements, an item must meet the definition of an element (i.e., asset, liability, equity, revenue, or expense) and have the qualitative characteristics of relevance, faithful representation, and verifiability. Measurability is an enhancing qualitative characteristic, but not a requirement for recognition. Understandability and realization are not relevant to recognition criteria. Therefore, option D is the most appropriate choice.

To Be Recognized in the Financial Statements, an Item Must