Proﬁt under accrual timing is subject to more distortion than cash ﬂow from operations because of large accruals and deferrals that can impact reported proﬁt.

Question

Quizplus · Accepted Answer

Accrual accounting involves recognizing revenue and expenses when they are earned or incurred, regardless of when the cash is exchanged. This can lead to large accruals and deferrals that can impact reported profit, making it subject to more distortion than cash flow from operations. As a result, it is important for investors and analysts to closely examine a company's financial statements and footnotes to fully understand the impact of these accruals and deferrals on reported profit.

Proﬁt Under Accrual Timing Is Subject to More Distortion Than