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:

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, representing the asset's wear and tear, deterioration, or obsolescence.

Prepaid Insurance

An asset account that represents the amount of insurance premiums that have been paid in advance and that has not yet expired as of the balance sheet date.

Factory Overhead Applied

The allocation of estimated factory overhead costs to individual units of production.

Depreciation Expenses

The systematic allocation of the depreciable amount of an asset over its useful life to account for wear and tear, obsolescence, or decay.