What is a misconception mentioned about the Profit & Loss Statement? A) It cannot be affected by external factors B) It shows the true profit or loss earned in a year C) It shows u... What is a misconception mentioned about the Profit & Loss Statement? A) It cannot be affected by external factors B) It shows the true profit or loss earned in a year C) It shows unrealized profits D) It perfectly depicts a firm’s long-term assets
Understand the Problem
The question is asking about misconceptions related to the Profit & Loss Statement, offering multiple choices to identify which statement is incorrect regarding what the Profit & Loss Statement represents.
Answer
C) It shows unrealized profits
The final answer is C) It shows unrealized profits
Answer for screen readers
The final answer is C) It shows unrealized profits
More Information
A common misconception about the Profit & Loss Statement is that it shows unrealized profits. In reality, it only reflects realized revenues and expenses during a specific period.
Tips
Make sure to differentiate between realized and unrealized profits when analyzing financial statements.
Sources
- How Are Realized Profits Different From Unrealized or 'Paper' Profits? - investopedia.com
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