Accrual Accounting Requires Frequent, Ongoing Changes in Estimates

question 60

Multiple Choice

Accrual accounting requires frequent, ongoing changes in estimates.Which of the following is/are true?

• A)As time passes and conditions change, new information becomes available that causes management to change the estimates required to apply accounting principles.
• B)Firms do not recalculate revenues and expenses of previous periods to incorporate new information involving estimates.
• C)Changes in estimates do not always relate to recurring accrual accounting measurements.
• D)Examples of changes in estimates include the amount of uncollectible accounts and the useful lives of depreciable assets.
• E)all of the above.

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Definitions:

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity.

Stock Market

A public market for buying, selling, and issuing shares of publicly held companies, serving as a critical mechanism for price discovery and capital allocation.

Leverage Ratio

A financial metric used to measure the degree of a company's debt compared to its assets, equity, or operational cash flow.

Financial Statements

Comprehensive reports that provide insights into a company's financial health, including balance sheets, income statements, and cash flow statements.