109. Adequate disclosure (a) Briefly explain what is meant by the principle of adequate disclosure.(b) How does professional judgment enter into the application of the principle of adequate...

109. Adequate disclosure

(a) Briefly explain what is meant by the principle of adequate disclosure.
(b) How does professional judgment enter into the application of the principle of adequate disclosure?
(c) List 5 types of information that a publicly-held corporation generally would be required to provide according to the concept of adequate disclosure.

(a) The principle of adequate disclosure means that financial statements should be accompanied by any information necessary for the statements to be interpreted properly. Most disclosures appear within several pages of notes (or footnotes) that accompany the financial statements.
(b) Drafting footnotes requires an in-depth understanding of the company and its operations. As there is no comprehensive list of information that must be disclosed and the content of the notes often is not drawn directly from the accounting records, the adequacy of disclosure is dependent upon the accountants' professional judgment. This professional judgment is used in selecting for disclosure those items that an intelligent person would consider necessary to properly interpret the financial statements.
(c) A publicly held corporation is generally required to disclose the following types of information (students are required to list five):

110. Indicate which of the following accounts will be closed to Income Summary at year-end.

(a) Cash
(b) Office Supplies Expense
(c) Unexpired Insurance
(d) Unearned Revenue
(e) Dividends
(f) Depreciation Expense
(g) Income Taxes Payable
(h) Accumulated Depreciation