All of the Following Regarding Reversing Entries Are True Except

question 26

Multiple Choice

All of the following regarding reversing entries are true except:

• A) Reversing entries are used to simplify a company's recordkeeping.
• B) Reversing entries are recorded in response to accrued assets and accrued liabilities that were created by adjusting entries at the end of the previous accounting period.
• C) Reversing entries are dated the first day of the new accounting period.
• D) Reversing entries are optional.
• E) Reversing entries should not be the exact opposite of previous period adjusting entries.

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Definitions:

Stockout Risks

The potential for inventory shortages that can result in lost sales, customer dissatisfaction, and negative impacts on a business's reputation and income.

EOQ

Economic Order Quantity, a formula used in inventory management to determine the optimal order size that minimizes total inventory costs.

Safety Stock

Additional inventory kept in reserve to protect against stockouts due to variability in demand or supply.

Reorder Point

The inventory level at which a new order should be placed to replenish stock before it runs out.