Historical cost accounting remains in use because of its practical advantages. Which of the following is NOT an advantage of historical cost accounting? i) Amounts of transactions are reliable and can be verified. ii) Amounts in the statement of financial position can be matched to amounts in the statement of cash flows. ii) It avoids the overstatement of profit which can arise during periods of inflation. iii) It provides fewer opportunities for creative accounting than systems of current value accounting.
Historical cost accounting remains in use because of its practical advantages. Which of the following is NOT an advantage of historical cost accounting? i) Amounts of transactions are reliable and can be verified. ii) Amounts in the statement of financial position can be matched to amounts in the statement of cash flows. ii) It avoids the overstatement of profit which can arise during periods of inflation. iii) It provides fewer opportunities for creative accounting than systems of current value accounting.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Historical cost accounting remains in use because of its practical advantages.
Which of the following is NOT an advantage of historical cost accounting?
i) Amounts of transactions are reliable and can be verified.
ii) Amounts in the statement of financial position can be matched to amounts in the
statement of cash flows.
ii) It avoids the overstatement of profit which can arise during periods of inflation.
iii) It provides fewer opportunities for creative accounting than systems of current
value accounting.
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