Limitations of the Income Statement Include All of the Following

question 55

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 judgement.
• D)income numbers are affected by the accounting methods employed.

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Definitions:

Selling and Administrative Expenses

Costs related to the selling of products and the general administration of a business.

Differential Income

The difference in income between two alternative decisions or scenarios, used in managerial decision-making to determine the better financial option.

Variable Cost

Expenses that change in proportion to the amount of goods produced or the volume of sales.

Differential Analysis

A financial technique used to compare the costs and benefits of alternative business decisions.