(L.O. 7) The process of reporting an item in the financial statements of an enterprise is:

a. recognition

b. realization.

c. allocation.

d. incorporation.

Explanation: The term recognition refers to the process of formally recording or incorporating an item in the accounts and financial statements of an entity. An item that gets recorded in the accounts eventually gets reported in the financial statements of the enterprise. Realization is the process of converting noncash resources and rights into money and is most precisely used in accounting and financial reporting to refer to sales of assets for cash or claims to cash. The term allocation refers to the process or result of allocating (assigning costs or systematically spreading costs). The term incorporation refers to the process of establishing a business in the corporate form of organization. (Solution = a.)