Question

Which of the following is a management assertion regarding account balances at the period end?

A. Transactions and events that have been recorded have occurred and pertain to the entity.
B. Transactions and events have been recorded in the proper accounts.
C. The entity holds or controls the rights to assets, and liabilities are obligations of the entity.
D. Amounts and other data related to the transactions and events have been recorded appropriately.

Answer 1

The management assertion regarding account balances at the period end that indicates the entity holds or controls the rights to assets, and that liabilities are its obligations is option C.

Step-by-step explanation:

The correct answer to the question of which management assertion regarding account balances at the period end is C: The entity holds or controls the rights to assets, and liabilities are obligations of the entity. This assertion refers to the company's rights to its assets and responsibility for its liabilities at the end of the accounting period.

Management assertions are an important part of financial reporting and auditing. They are claims made by management regarding various aspects of business figures which are then verified by auditors. For example, in a T-account, which is used to represent a company's ledger, the total assets must equal the sum of the total liabilities and net worth. This alignment assures that all recorded transactions are reflected in the right accounts, maintaining the integrity of the company's financial records.

Answer 2

The management assertion regarding account balances at the period end is that the entity holds or controls the rights to assets, and liabilities are obligations of the entity.

Step-by-step explanation:

Option C, 'The entity holds or controls the rights to assets, and liabilities are obligations of the entity,' is a management assertion regarding account balances at the period end.

This assertion ensures that the entity has legal ownership or control over the assets reported in the account balances and that the liabilities reflected in the account balances are indeed obligations of the entity.

For example, in a T-account for a bank, the assets side would include the bank's reserves and loans made by the bank, while the liabilities side would include the deposits made by customers. The management assertion in option C affirms that the bank has the rights to these assets and that the liabilities represent the bank's obligations to its customers.