What Is Not a Valid Criticism of Historical Cost Accounting

question 16

Multiple Choice

What is not a valid criticism of historical cost accounting?

• A) It is not relevant in times of changing prices
• B) It is not logical to add assets together that have been purchased in different periods, with dollars of different purchasing power
• C) It understates profit in times of rising prices
• D) It distorts current year's operating results by including the current year's income, holding gains that accrued in previous periods

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Definitions:

Provincial Income Tax

The tax levied by a provincial government on the income of individuals and organizations within its jurisdiction, varying from province to province.

Federal Income Tax Payable

Liabilities owed to the federal government for income taxes that have been incurred but not yet paid.

Direct Method

An accounting approach for the cash flow statement that lists major classes of gross cash receipts and payments.

Deferred Revenue

Deferred revenue is income a company has received for goods or services yet to be delivered or performed, recognized as a liability on the balance sheet until the obligation is fulfilled.