An accounting estimate is _______.
A)an exact monetary amount when a precise means of measurement is available
B)an approximation of a monetary amount when a precise means of measurement is not available
C)prohibited by GAAP and should be questioned by the auditor
D)a figure that should be left to the external auditor to determine at the end of the year

Question

Quizplus · Accepted Answer

An accounting estimate is an approximation of a monetary amount when a precise means of measurement is not available. It is a necessary part of financial reporting, but it requires judgment and is subject to potential bias or error. GAAP allows for accounting estimates as long as they are reasonable and based on relevant information. The auditor must review the accounting estimates and assess their reasonableness.

An Accounting Estimate Is _______