What are the major limitations of the balance sheet as a source of information?
The major limitations of the balance sheet are:
(a) The values stated are generally historical and not at fair value.
(b) Estimates have to be used in many instances, such as in the determination of collectibility of receivables or finding the approximate useful life of long-term tangible and intangible assets.
(c) Many items, even though they have financial value to the business, presently are not recorded. One example is the value of a company's human resources.
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