What role does the unit of measurement assumption play in multinational accounting? a) It requires translation of foreign operations into reporting currency b) It only applies to domestic transactions c) It prohibits foreign currency transactions d) It requires all transactions in gold standard

Answer

1. Which of the following statements is incorrect? *   A. A foreign operation (e.g., a branch) that is essentially an extension of the entity (e.g., the home office) would have the same functional currency as that of the entity. B. An entity can only have one functional currency but it can have as many presentation currencies as it wishes. C. Subsequent to initial recognition, both monetary and non-monetary items arising from a foreign currency transaction are translated at the closing rate. D. A foreign currency transaction is initially recognized at the spot exchange rate at the date of the transaction.   2. According to PAS 21, exchange differences arising from the translation of monetary items arising from foreign currency transactions are recognized in *   A. Directly in equity B. Any of these C. Other comprehensive income D. Profit or loss

Accounting for Foreign Currency Transactions:   Accounting for foreign currency transactions involves recording and reporting financial transactions denominated in a currency other than the entity's functional currency. Here are the key steps involved in handling such transactions:   **1. Identifying Foreign Currency Transactions:   Definition: Foreign currency transactions occur when a business entity conducts financial transactions, such as sales, purchases, or investments, in a currency different from its functional currency.   Examples: Buying goods from a foreign supplier, selling products to overseas customers, or borrowing funds in a foreign currency.   **2. Determining the Functional Currency:   Primary Currency: Each business entity designates a functional currency, which is the primary currency used in its day-to-day operations and financial reporting.   Factors Considered: Factors such as the location of the entity's primary economic activities, the currency in…