Which of the Following Is Considered to Be a Limitation

question 118

Multiple Choice

Which of the following is considered to be a limitation of income statements?

• A) Income statements depend on accounting methods selected.
• B) Income statements evaluate past performance.
• C) Income statements assess uncertainties of achieving future cash flows.
• D) Income statements predict future performance.

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Definitions:

Investment in Associate

Investment in another entity where the investor has significant influence over the investee but does not control or jointly control it, usually represented by ownership of 20% to 50% of the voting stock.

Share Capital

The funds raised by a company through the issuance of shares to investors, representing the equity stake of shareholders.

Retained Earnings

The portion of a company’s profits that is kept or retained and not distributed to shareholders as dividends.

General Reserve

Funds set aside from profits for undisclosed general purposes, serving as a buffer for future financial uncertainties or for any identified but not immediate needs.