What Are the Three Limitations of the Income Statement? (2024)

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The limitations of income statement are as follows:

  1. Income is reported based on the accounting rules and does not represent the actual cash changing hands.
  2. There will be variation in the way inventory is calculated (either FIFO or LIFO) and therefore income statements cannot be compared.
  3. The statements can be limited by intentional misrepresentation
  4. Certain revenue, expenses, gains or losses are not reported reliably and are therefore not added in the income statement.

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See Also
What Are the Four Limitations of Financial Statements?Five approaches to financial statement analysis - Keele University - Study onlineWhich of the following is not a limitation of ‘Financial Statements Analysis’?Financial data - Understanding business performance - Edexcel - GCSE Business Revision - Edexcel - BBC Bitesize

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