If expenses are classified into the groups, cost of sales, selling expenses, administrative expenses and finance expenses, under IAS 1/AASB 101 they are classified by:
A) nature.
B) function.
C) liquidity.
D) tangibility.

Question

Quizplus · Accepted Answer

IAS 1/AASB 101 require expenses to be classified by their function, i.e. cost of sales, selling expenses, administrative expenses and finance expenses, in order to provide information that is relevant to users in assessing an entity's financial performance. Classifying expenses by nature (A) would refer to the type of expense, such as salaries, rent, etc., rather than the function they serve. Liquidity (C) and tangibility (D) are not relevant classifications for expenses.

If Expenses Are Classified into the Groups, Cost of Sales