Which of the Following Statements Is True

question 33

Multiple Choice

Which of the following statements is true?

• A) reversing entries are compulsory.
• B) all accruals must be reversed.
• C) reversing entries are optional and are only made to simplify the recording process at the start of the new accounting period.
• D) reversing entries are made on the last day of the financial year.

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Definitions:

Common Size Balance Sheets

Balance sheets expressed as percentages, allowing for easier comparison across companies or periods by standardizing financial statements.

FIFO vs. LIFO

Accounting methods for valuing inventory; First In, First Out (FIFO) and Last In, First Out (LIFO) affect the cost of goods sold and inventory valuation.

Economic Value Added

A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit.

Cost of Debt

The effective rate that a company pays on its current debt.