Income Can Be Distorted by Factors Other Than Inflation

question 107

Multiple Choice

Income can be distorted by factors other than inflation.The most important causes of distortion for inter-industry comparisons are:

• A) accounting trends.
• B) application of IFRS.
• C) timing of revenue receipts and nonrecurring gains or losses.
• D) cash reinvestment.

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Definitions:

Financial Statements

These are formal records of the financial activities and position of a business, person, or other entity, presenting the results of operations and financial condition.

Journal Entry

A record in the books of accounts that documents a business transaction.

Acquisition

The process of obtaining control of another company either through purchase or merger.

Book Value

The net value of a company's assets minus its liabilities, as recorded on the balance sheet.