Discuss this statement: “Firms can control their accruals within fairly wide limits.”

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Discuss this statement: “Firms can control their accruals within fairly wide limits.”

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Discuss this statement: “Firms can control their accruals within fairly wide limits.”

Explanation & AnswerSolution by a verified expert

Explanation

Accruals refer to any expenses that have been incurred but not yet recorded in the books of accounts. They automatically increase with an increase in operations of the firm.
 
Firms do not have any control over accruals because the timing of the accruals are dependent on the industry norms, economic forces, and tax payment dates set by law.

Verified Answer

Accruals refer to the outstanding payments for the services received that should be done by the company before publishing its financial statements.
The occurrence of the accruals are dependent on many external factors; hence, firms have no control over them.

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