Question

Which of the following is a limitation of accounting that can affect the accuracy and usefulness of financial statements?

A Accounting principles and standards vary across different countries and jurisdictions Correct Answer Incorrect Answer
B Financial statements cannot reflect future events or changes in market conditions Correct Answer Incorrect Answer
C Financial statements do not provide information about a company's internal controls or management practices Correct Answer Incorrect Answer
D Financial statements only report quantitative information and do not capture qualitative factors such as brand reputation or customer loyalty Correct Answer Incorrect Answer

Solution

While financial statements are an important tool for analyzing a company's financial performance, they are limited in their ability to reflect future events or changes in market conditions. This is because financial statements are based on historical data and do not take into account changes in economic conditions, technological advancements, or shifts in consumer preferences that may impact a company's future performance.

Practice Next
×
×