Financial Information Does Not Demonstrate Comparability When

question 25

Multiple Choice

Financial information does not demonstrate comparability when

• A)firms in the same industry use different accounting methods to account for the same type of transaction.
• B)a company changes its estimate of the residual value of a fixed asset.
• C)a company fails to adjust its financial statements for changes in the value of the measuring unit.
• D)none of these.

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Definitions:

Crowding-Out Effect

The phenomenon where increased government spending leads to a reduction in private sector spending and investment due to higher interest rates or other factors.

Government Spending

The total amount of public expenditure by a government, including spending on defense, education, public infrastructure, and welfare programs.

Private Investment

The expenditure on capital goods by private sector firms or individuals in order to generate future income or profits, excluding government spending.

Crowding-In Effect

An increase in private sector spending stimulated by federal budget deficits financed by U.S. Treasury borrowing.