CAF-1 · Chapter 9 · Question 4 of 15
Under the 'Physical Capital Maintenance' concept, when is a profit considered to be earned?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Only if the physical productive capacity of the entity at the end of the period exceeds the physical productive capacity at the beginning.
Explanation
Physical capital maintenance measures profit only if the physical productive capacity (or operating capability) at the end of the period exceeds that at the beginning, excluding owner contributions/distributions.
More Conceptual and Regulatory Framework MCQs
- Q6According to the Conceptual Framework, 'materiality' is an entity-specific aspect of which fundamental qualitative characteristic?
- Q7How is the total carrying amount of 'equity' measured in general purpose financial statements?
- Q8To be a perfectly 'faithful representation', a depiction in financial statements should possess which three characteristics?
- Q9Under financial capital maintenance measured in 'units of constant purchasing power', what adjustment must be made?
- Q10Which of the following represents an 'economic resource' as defined by the Conceptual Framework?