Financial accounting data has some inherent limitations to investors. Which of the following is a limitation?

I. Not all economic events are easily quantifiable.
II. Many accounting entries rely heavily on estimates.
III. Historical costs do not accurately reflect the true value of firms.
IV. Inflation can distort analysis of accounting data.

A)I, II and III
B)I, III, and IV
C)II, III, and IV
D)I, II, III, and IV

Question

Financial accounting data has some inherent limitations to investors. Which of the following is a limitation?

I. Not all economic events are easily quantifiable.
II. Many accounting entries rely heavily on estimates.
III. Historical costs do not accurately reflect the true value of firms.
IV. Inflation can distort analysis of accounting data.

A)I, II and III
B)I, III, and IV
C)II, III, and IV
D)I, II, III, and IV

Quizplus · Accepted Answer

All the options listed are inherent limitations of financial accounting data. Not all economic events can be quantified, many entries are based on estimates, historical costs may not reflect current values, and inflation can distort financial analysis.

Financial Accounting Data Has Some Inherent Limitations to Investors