Question

[5] According to the FASB’s conceptual framework, which of the following best describes the distinction between expenses and losses? A. Losses are reported net of related tax effect, and expenses are not. B. Losses are decreases in net assets, and expenses are not. C. Losses are material, and expenses are immaterial. D. Losses result from peripheral or incidental transactions, and expenses result from ongoing major or central operations of the entity

Answer 1

Answer:

D. Losses result from peripheral or incidental transactions, and expenses result from ongoing major or central operations of the entity

Explanation:

The expenses represent the cash outlow or liabilities taken to carry out the activities to continue his operations.

While the Gains and Losses are incidental transactions or other events which are not controlled by the entity management. They aren't the outcome of the company's decisions. Thus, they could arise from changes in price of real state, equipment, tecnology breakthrough which means equipment obsolete and so on.