Depreciation Is an Accrual Accounting Entry That Does Not Affect

question 55

True/False

Depreciation is an accrual accounting entry that does not affect the cash account so it needs to be adjusted for when using the indirect method of the Cash Flow Statement.

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Definitions:

Current Assets

Assets expected to become cash in less than one year. Current assets are largely cash, receivables, and inventories.

Current Liabilities

Financial obligations a company is due to pay within one year or within its operating cycle if longer than a year.

EOQ Model

Economic Order Quantity Model; a formula used to determine the optimal order quantity that minimizes total inventory costs.

Annual Ordering Cost

The total expenses associated with placing orders for goods or inventory over the course of a year.