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Questions and Answers
What is a limitation of Historical Cost Accounting (HCA) in terms of decision-making?
What is a limitation of Historical Cost Accounting (HCA) in terms of decision-making?
- It is only used for small businesses
- It does not provide sufficient information for evaluating business decisions (correct)
- It provides current and relevant information for business decisions
- It is not relevant for businesses with non-current assets
What assumption is made in Historical Cost Accounting regarding the life of a firm?
What assumption is made in Historical Cost Accounting regarding the life of a firm?
- The firm is not expected to continue
- The firm will eventually go bankrupt
- The firm has a limited lifespan
- The firm has an indefinite lifespan (correct)
Why is Historical Cost Accounting open to manipulation in financial reporting?
Why is Historical Cost Accounting open to manipulation in financial reporting?
- Because it is based on arbitrary decisions
- Because it is based on current market values
- Because it is based on the subjective judgment of management (correct)
- Because it is based on objective measures
What is a criticism of Historical Cost Accounting regarding the matching concept?
What is a criticism of Historical Cost Accounting regarding the matching concept?
What is a limitation of Historical Cost Accounting in terms of relevance?
What is a limitation of Historical Cost Accounting in terms of relevance?
What is a criticism of Historical Cost Accounting regarding asset valuation?
What is a criticism of Historical Cost Accounting regarding asset valuation?
What is the main concern of traditional accounting according to Sprouse (1973)?
What is the main concern of traditional accounting according to Sprouse (1973)?
What is the primary focus of conventional accounting?
What is the primary focus of conventional accounting?
What assumption underlies the basic concept of Current Cost Accounting (CCA)?
What assumption underlies the basic concept of Current Cost Accounting (CCA)?
What is a limitation of Historical Cost Accounting (HCA) for decision-making?
What is a limitation of Historical Cost Accounting (HCA) for decision-making?
What is a consequence of conventional accounting practices?
What is a consequence of conventional accounting practices?
What is a key aspect of investor needs that conventional accounting takes for granted?
What is a key aspect of investor needs that conventional accounting takes for granted?
What is the primary objective of Current Cost Accounting?
What is the primary objective of Current Cost Accounting?
Which of the following is a limitation of Historical Cost Accounting for decision making?
Which of the following is a limitation of Historical Cost Accounting for decision making?
What is the main assumption underlying the Going Concern concept?
What is the main assumption underlying the Going Concern concept?
Which of the following is a key concept in the Decision-Usefulness approach?
Which of the following is a key concept in the Decision-Usefulness approach?
What is the main objective of financial reporting according to the Objectivity principle?
What is the main objective of financial reporting according to the Objectivity principle?
What is a potential consequence of manipulation of financial reporting?
What is a potential consequence of manipulation of financial reporting?
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