The Fallacy of Composition Refers to the False Assumption

question 60

Multiple Choice

The fallacy of composition refers to the false assumption:

• A) that if A happens before B, then A caused B.
• B) that what is true for a part will also be true for the whole.
• C) that what is true for the whole must also be true for a part.
• D) of all other things held constant.

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Definitions:

Bad Debts Expense

The portion of receivables that a company anticipates will not be collected and is thus written off as an expense in the financial statements.

Operating Expense

Incurred expenses that are related to a company's main operational activities, excluding cost of goods sold and capital expenditures.

Statement of Income

A financial statement that reports a company's financial performance over a specific period, showing income, expenses, and net profit or loss.

Allowance for Doubtful Accounts

An estimation of the accounts receivable that may not be collected due to customer defaults.