Why Are Excessive Accruals a Concern for Accounting and Financial

question 15

Multiple Choice

Why are excessive accruals a concern for accounting and financial reporting?

• A)They improve the quality of earnings of the company.
• B)They may represent unethical practices by the company.
• C)They require too much professional judgment.
• D)They result in standards overload.

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Definitions:

Credit

Refers to the trust allowing one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately but promises either to repay or return those resources at a later date.

Supplier

A person or organization that provides goods or services to another entity, typically as part of a supply chain.

Cash

Currency and other liquid instruments in a financial system or on a company's balance sheet used for transactions or settling debts.

Inventory

The goods and materials that a business holds for the purpose of resale or production.