HORNGREN COST ACCT NON-MAJORS W/ACCESS
HORNGREN COST ACCT NON-MAJORS W/ACCESS
17th Edition
ISBN: 9781323703748
Author: Datar
Publisher: Pearson Custom Publishing
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Textbook Question
Chapter 21, Problem 21.1Q

“Capital budgeting has the same focus as accrual accounting.” Do you agree? Explain.

Expert Solution & Answer
Check Mark
To determine

Capital Budgeting:

It refers to the long term investment decisions that has been taken by the top management of a company and that are irreversible in nature. These decisions require investment of large amount of cash of the company.

To explain: Whether the given statement is correct or not.

Answer to Problem 21.1Q

The given statement is not correct.

Explanation of Solution

  • Accrual accounting focuses on the transactions in a particular accounting period while capital budgeting considers the cash flows throughout the life of the asset.
  • Therefore, this statement is false that capital budgeting and accrual accounting has same focus.
Conclusion

Thus, the given statement is not correct.

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Students have asked these similar questions
In most capital budgeting decisions, the emphasis should be on reported earnings rather than cash flows
In the context of capital budgeting, what is meant by the word “discounting”?
Use an example to explain to show why capital budgeting relies on cash flows rather than net income?

Chapter 21 Solutions

HORNGREN COST ACCT NON-MAJORS W/ACCESS

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