A Limitation of the Balance Sheet in Portraying the Financial

question 43

Multiple Choice

A limitation of the balance sheet in portraying the financial position of an entity is:

• A) items which cannot be measured in money are not included.
• B) there is no adjustment to values for inflation.
• C) the historical cost approach means that assets are not shown at their estimated market values.
• D) all of the above are limitations.

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Definitions:

Pension Program

A retirement plan offered by an employer that provides a regular income to employees after they retire.

Paid Vacation

A period of time, often legally mandated, during which an employee is allowed to be away from work while still receiving pay.

Workers' Compensation

State programs that provide benefits to workers who suffer work-related injuries or illnesses, or to their survivors.

Employee Retirement Income Security Act

A federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.