The functional currency of an entity is defined as the currency of the primary economic environment in which the entity operates. This is typically the currency in which the entity conducts most of its transactions and generates most of its cash flows.

1. **Reporting Currency**: This is the currency in which the financial statements are presented. It can differ from the functional currency.

2. **Local Currency**: This is often the currency of the country in which the entity is located but does not necessarily reflect the primary economic environment in which it operates.

3. **None of the Above**: This option suggests that neither reporting currency nor local currency is the correct answer.

Considering the above definitions, the correct answer would be **Local Currency**, as it usually aligns more closely with the functional currency concept than the reporting currency.

In summary, when determining an entity's functional currency, one typically looks to its local currency, as this reflects the economic environment in which the entity primarily functions and transacts.

Question

The functional currency of an entity is defined as the currency of the primary economic environment in which the entity operates. This is typically the currency in which the entity conducts most of its transactions and generates most of its cash flows.

1. **Reporting Currency**: This is the currency in which the financial statements are presented. It can differ from the functional currency.
   
2. **Local Currency**: This is often the currency of the country in which the entity is located but does not necessarily reflect the primary economic environment in which it operates.

3. **None of the Above**: This option suggests that neither reporting currency nor local currency is the correct answer.

Considering the above definitions, the correct answer would be **Local Currency**, as it usually aligns more closely with the functional currency concept than the reporting currency.

In summary, when determining an entity's functional currency, one typically looks to its local currency, as this reflects the economic environment in which the entity primarily functions and transacts.

Knowee AI · Accepted Answer

The functional currency of an entity is defined as the currency of the primary economic environment in which the entity operates. This is typically the currency in which the entity conducts most of its transactions and generates most of its cash flows.

1. **Reporting Currency**: This is the currency in which the financial statements are presented. It can differ from the functional currency.
   
2. **Local Currency**: This is often the currency of the country in which the entity is located but does not necessarily reflect the primary economic environment in which it operates.

3. **None of the Above**: This option suggests that neither reporting currency nor local currency is the correct answer.

Considering the above definitions, the correct answer would be **Local Currency**, as it usually aligns more closely with the functional currency concept than the reporting currency.

In summary, when determining an entity's functional currency, one typically looks to its local currency, as this reflects the economic environment in which the entity primarily functions and transacts.

he entity's functional currency is usually the ____________.a.Reporting currencyb.Local currencyc.None of the aboved.Functional currency

Question

The entity's functional currency is usually the ____________.

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