20.Earnings management general

20.Earnings management generally makes income statement informationmore useful for predicting future earnings and cash flows.

Select one:



19.The earnings per share computation is notrequired for

Select one:

a. Gain on disposal of discontinued operation, net oftax.

b. Income from operations.

c. Net income.

d. Income from continuing operations


Q-20. False

Explanation-As weknow that earnings management is a of management which is associateto manipulate financial records to display positive financialposition of the company like- application of accounting policy thatgenerates higher short-term earnings.

But earnings management does notmake income statement information more useful for predicting futureearnings and cash flows because predicting future earnings and cashflows are complex activities as many other factors are alsoresposible like-demand and supply, economic policies og thegovernment etc.,  so it does not provide all of therelevant financial information of a company for predicting futureearnings and cash flows.

Q-19. Basicearnings per share is calculated by dividing the netprofit or loss on continuing operationsby the weighted average number of ordinary shares in issue duringthe period. So while calculating EPS we calculate earnings oncontinuing operations.

If there are anydiscontinued operations,net of tax in the entity,the EPS from this discontinued operation may also be calculated,but is not disclosed on the face of the Statement of ComprehensiveIncome.

When we talk about Income fromoperations we find that it is part of profit which comes bydeducting expenses directly associated with the operation of thebusiness, such as the cost of goods sold , general andadministrative expenses, from net Revenues. Thus Incomefrom operations is not directly associated to earnings pershare.

So the earnings per sharecomputation is not required for Income from operations (Option”B”)

Thanks & all thebest…………..

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