In relation to limitations of financial accounting, which of the following statements is INCORRECT?
Financial accounting discloses the present value of the business.
The correct answer is option 1. Financial accounting does not disclose the present value of the business. It records historical data, including past transactions and the financial position at a particular point in time. The other statements are true, as financial accounting allows some flexibility in accounting treatments, is influenced by personal judgments (especially when estimation is required), and may not capture non-monetary information such as employee morale or brand value.
Important Questions from Financial Statement Analysis
________ is historical in nature and reflects the past position of business organization.
Which one of the following is a limitation of Financial Accounting?
Ind AS 1 requires financial statements to comprise of SOCIE, a concept which was not there under Indian GAAP. SOCIE refers to ________.
Sale of long-term investment shows
The information with respect to a company is:
EBIT = Rs. 35 lakhs
15% Term loan = Rs. 50 lakhs
Working capital term loan from bank @ 20% = Rs. 30 lakhs
10% Preference share capital = Rs. 10 lakhs
Public deposits accepted @ 14% = Rs. 15 lakhs
Which one among the following is the Interest Coverage Ratio for the company?
