Which of the following is not a limitation of financial statements? A.It is possible that two...
Which of the following is not a limitation of financial statements?
A.It is possible that two firms operating in the same industry may follow different accounting methods for the exact same transaction.
B.Financial statements are not adjusted to show the impact of inflation.
C Financial statements do not reflect opportunity cost, which is an economic concept relating to income forgone because an opportunity to earn income was not pursued.
D. Full disclosure requires that the financial statements and notes include all necessary information to prevent a reasonably astute user of the financial statements from being misled
Homework Answers
Option D i.e. Full disclosure requires that the financial statements and notes include all necessary information to prevent a reasonably astute user of the financial statements from being misled.
Reason:-
Option A is a limitation because companies are not comparable even after having exact same transaction.
Option B is a limitation because it doesn't show the impact of inflation.
Option C is a limitation because it fails to reflect opportunity costs.
Option D is not a limitation because it safeguards user from being mislead.
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