Question

One of the limitation of accounting is that the figure given in financial statements ignore the effect of
change in price level
(a) True
(b) False
(c) Partially false
(d) Can't say

Answer 1

Answer:

true

its change in price level.

Answer 2

One of the limitations of accounting is that the figure given in financial statements ignore the effect of change in price level:-

The correct option is a)True.

• This is true because the accounting statement does not reflect the change in the price level.
• Some uncontrollable factors in the economy like in case of inflation or deflation, the financial position of the company or organizations is not shown correctly in the accounting statement.
• An accounting statement is based on the historical cost concept which is why it records the value of the asset based on the time of its purchase.
• An accounting statement cannot record the fluctuations in the price level of its assets.