Which Statement Is True Regarding Accounting Accruals

question 14

Multiple Choice

Which statement is true regarding accounting accruals?

• A)The nature of accrual accounting is that accruals will reverse when cash cycles are complete.
• B)Operating activities generally have relatively long cash cycles.
• C)Financing and investing activities generally have relatively short cash cycles.
• D)Errors or changes in accounting policy that affect non-current items like equipment will result in follow-through changes over a relatively short period.

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Definitions:

Accounts Payable

A liability account that records amounts a company owes to suppliers for goods and services purchased on credit.

Statement Of Cash Flows

A financial statement that provides aggregate data regarding all cash inflows and outflows a company receives from its ongoing operations, investment, and financing activities.

Accounts Receivable

Money owed to a business by its customers for products or services delivered on credit.

Inventory

Refers to the goods and materials a business holds for the purpose of resale or production.