EFM03-03(1)

Question 1

What information is found on each of the three basic financial statments.

Answer 1

Income statement

Balance sheet

Question 2

What is the limitations of financial statements?

Answer 2

• Not all assets of a company are included
• intellectual property not reflected as an asset
• assets are reflected at historical cost
• estimates must be used for depreciation, the collectibility of a/r, the salability of inventory, and the amount of warranty liability outstanding.
• financial statements affected by the choice of accounting methods(FIFO, LIFO, or average cost)