Asked by Laura De Luna on May 23, 2024
Verified
Which of the following is not a limitation of the income statement?
A) Comparability between companies may suffer because companies don't have enough leeway to choose between accounting methods.
B) The use of different formats by companies within the same industry may hide differences in operating results.
C) The use of functional classifications, instead of activity classifications, for operating expenses may not provide sufficient information for predicting future cash outflows.
D) The matching of allocated historical costs against current revenues may not provide an accurate measure of a return on capital.
Income Statement
A financial statement that reports a company's financial performance over a specific accounting period detailing revenues, expenses, profits, and losses.
Comparability
The quality that allows users to analyze and recognize similarities and differences between two or more items of financial information.
Operational Results
The financial outcomes resulting from a company's core business operations.
- Acknowledging the importance and structure of the income statement in financial documents.
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Learning Objectives
- Acknowledging the importance and structure of the income statement in financial documents.
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