An example of an accounting method that could affect operating income is
A) inventory valuation method.
B) revenue recognition method.
C) depreciation method.
D) all of these could affect operating income.

Question

Quizplus · Accepted Answer

All three methods (inventory valuation, revenue recognition, and depreciation) involve estimating or allocating costs, revenues, or expenses, which can impact the calculation of operating income. For example, a company using a different inventory valuation method (such as FIFO rather than LIFO) may report different cost of goods sold and gross profit, which can impact operating income. Similarly, a company using a more aggressive revenue recognition method may recognize revenue earlier than a company using a more conservative method, which can impact operating income. Lastly, the depreciation method used can also impact operating income by impacting the amount of expense recognized for each reporting period.

An Example of an Accounting Method That Could Affect Operating