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CSEET · Fundamentals of Accounting · Basic Concepts and Principles of Accounting

Under the Framework, the presentation of the elements of financial statements in the balance sheet and statement of profit and loss involves a process of sub-classification. According to the Framework, assets and liabilities may be sub-classified by:

The Framework says assets and liabilities may be sub-classified by their nature or function in the business of the enterprise. This is done to display the information in the manner most useful to users for making economic decisions.

  1. Atheir nature or function in the business of the enterpriseCorrect
  2. Bthe names of the persons who own them
  3. Cthe date on which the auditor approves them
  4. Dthe amount of tax they attract

Explanation

The Framework gives the example that assets and liabilities may be classified by their nature or function in the business of the enterprise, so that information is displayed in the manner most useful to users for economic decisions. The other options are not bases of classification mentioned there.

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