Question

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

Select one:

True

False

19.The earnings per share computation is not required for

Select one:

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

b. Income from operations.

c. Net income.

d. Income from continuing operations

Answer 1

Q-20. False

Explanation-As we know that earnings management is a of management which is associate to manipulate financial records to display positive financial position of the company like- application of accounting policy that generates higher short-term earnings.

But earnings management does not make income statement information more useful for predicting future earnings and cash flows because predicting future earnings and cash flows are complex activities as many other factors are also resposible like-demand and supply, economic policies og the government etc.,  so it does not provide all of the relevant financial information of a company for predicting future earnings and cash flows.

Q-19. Basic earnings per share is calculated by dividing the net profit or loss on continuing operations by the weighted average number of ordinary shares in issue during the period. So while calculating EPS we calculate earnings on continuing operations.

If there are any discontinued 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 Comprehensive Income.

When we talk about Income from operations we find that it is part of profit which comes by deducting expenses directly associated with the operation of the business, such as the cost of goods sold , general and administrative expenses, from net Revenues. Thus Income from operations is not directly associated to earnings per share.

So the earnings per share computation is not required for Income from operations (Option "B")

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