Asked by Abigail Dupont on May 02, 2024
Verified
Bruce's Bouquets rents a small shop located in the outskirts of Melbourne. In accordance with the Conceptual Framework, Bruce's Bouquets should recognise the monthly payment for the shop rental as:
A) an increase in income and a decrease in liabilities.
B) a decrease in assets and an increase in equity.
C) a decrease in assets and a decrease in income.
D) a decrease in assets and an increase in expense.
Conceptual Framework
A set of theoretical principles and concepts that underpin and guide the standards, rules, and procedures of accounting and financial reporting.
Recognise
The accounting process of officially recording an item or transaction in the financial statements.
Monthly Payment
The amount of money that is paid on a monthly basis for the use of a service or repayment of a loan.
- Recognize the proper accounting treatment for operational expenses like rental payments.
Verified Answer
EF
Emmanuel FrimpongMay 08, 2024
Final Answer :
D
Explanation :
According to the Conceptual Framework, expenses are decreases in assets or increases in liabilities that result in decreases in equity. Therefore, the monthly payment for the shop rental should be recognised as a decrease in assets and an increase in expense. Option A is incorrect as the payment for shop rental is not an increase in income for Bruce's Bouquets. Option B is incorrect as the payment for shop rental does not result in an increase in equity. Option C is incorrect as the payment for shop rental is not a decrease in income.
Learning Objectives
- Recognize the proper accounting treatment for operational expenses like rental payments.