Application of accrual accounting involves making judgments and assumptions.

Question

Quizplus · Accepted Answer

Accrual accounting requires the use of estimates and assumptions to measure and record transactions that occur over time, such as recognizing revenue and expenses when they are earned or incurred, regardless of when cash is actually received or paid. Therefore, it involves making judgments and approximations to ensure that financial statements are presented fairly and accurately.

Application of Accrual Accounting Involves Making Judgments and Assumptions