Which statement is true regarding accounting accruals?
A)Errors or changes in accounting policy that affect non-current items like equipment will result in follow-through changes over a relatively short period.
B)The purchase of equipment involves an initial accrual to record the asset followed by accrual reversals in the form of depreciation expense and derecognition of the asset upon disposal.
C)Operating activities generally have relatively long cash cycles.
D)Financing and investing activities generally have relatively short cash cycles.

Question

Quizplus · Accepted Answer

The purchase of equipment is initially recorded as an asset (an accrual), and over time, this initial accrual is reversed through depreciation (which spreads the cost of the asset over its useful life) and eventually through the derecognition of the asset upon its disposal. This process reflects the true nature of accrual accounting, where transactions are recorded when they occur, not necessarily when cash changes hands.

Which Statement Is True Regarding Accounting Accruals