Which of the following is not a limitation of the balance sheet?
A)In periods of inflation, lack of disclosure makes it impossible to determine which amounts reported show purchasing power of the assets and liabilities.
B)It fails to include all of a company's economic resources and obligations.
C)Many of the amounts reported are based on estimates, which are subject to change.
D)Valuing assets and liabilities using historical costs does not help in assessing a company's future cash flows.

Question

Quizplus · Accepted Answer

The limitation mentioned in choice A is not accurate regarding balance sheets. Balance sheets do reflect historical costs, and while they may not directly indicate the purchasing power of assets and liabilities, this is not considered a limitation in the context of the question. The other options (B, C, D) accurately describe common limitations of balance sheets: not capturing all economic resources and obligations, relying on estimates, and using historical costs which may not be useful for predicting future cash flows.

Which of the Following Is Not a Limitation of the Balance