Limitations of the Income Statement Include All of the Following

question 44

Multiple Choice

Limitations of the income statement include all of the following except

• A)items that cannot be measured reliably are not reported.
• B)only actual amounts are reported in determining net income.
• C)income measurement involves judgment.
• D)income numbers are affected by the accounting methods employed.

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Definitions:

Opportunity Cost

The expense incurred by not choosing the second-best option when making a decision or selection.

Comparative Advantage

The capacity of an entity to generate a product or service with a smaller opportunity cost than others.

Absolute Advantage

The capacity of an entity to manufacture a product or provide a service more effectively than its rivals, by utilizing fewer resources.

Comparative Advantage

A principle in economics that asserts a country's ability to produce a good at a lower opportunity cost compared to another country, fostering global trade efficiency.