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CMA Intermediate · Corporate Accounting and Auditing · Conceptual Framework

Under the Conceptual Framework for Financial Reporting under Ind AS, which of the following best describes the objective of financial statements?

The objective of financial statements is to provide information about assets, liabilities, equity, income and expenses that helps users assess prospects for future net cash inflows to the entity and judge management's stewardship of its economic resources. It is not about tax computation or valuing the whole entity.

  1. ATo provide information about the entity's assets, liabilities, equity, income and expenses that is useful to users in assessing prospects for future net cash inflows and management's stewardshipCorrect
  2. BTo determine the taxable income of the reporting entity for the year
  3. CTo show the current market value of the entity as a whole to prospective buyers
  4. DTo ensure that every Ind AS is overridden where the Framework suggests a better treatment

Explanation

Paragraph 3.2 states that the objective of financial statements is to give information about assets, liabilities, equity, income and expenses useful in assessing prospects for future net cash inflows and management's stewardship. Tax computation and valuation of the entity are not the stated objective. The Framework also does not override any Ind AS.

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