An operating cycle may exceed 12 months and be longer than an accounting cycle.

Question

Quizplus · Accepted Answer

An operating cycle is the time it takes for a company to purchase inventory, sell it, and receive payment from customers. This cycle can exceed 12 months if the company's business model involves a long-term process before the sale of inventory, such as the manufacturing of goods. The accounting cycle, on the other hand, is the process of recording and reporting a company's financial transactions within a specific period (usually one year).

An Operating Cycle May Exceed 12 Months and Be Longer