Which of the following statements is true?
A) GAAP-based financial statements are prepared according to the "cash" rather than the "accrual" basis of accounting.
B) Accounting choices and estimates can have a significant impact on the outcome of financial statement numbers.
C) The accrual method means that the expense is recognized after the cash is paid out.
D) The purpose of the accrual method is to attempt to "match" assets with liabilities in appropriate accounting periods.

Question

Quizplus · Accepted Answer

Accounting choices and estimates can have a significant impact on the outcome of financial statement numbers. Choices such as depreciation methods, inventory valuation, and revenue recognition can all have a material impact on financial statements. It is important for accountants to carefully consider these choices and make appropriate disclosures to ensure users of the financial statements have an accurate understanding of the company's financial position and performance. Statements prepared under GAAP are prepared on an accrual basis, meaning expenses are recognized when they are incurred, regardless of when the cash is paid out. The purpose of the accrual method is to attempt to "match" assets with liabilities in appropriate accounting periods.

Which of the Following Statements Is True