Question

Income smoothing refers to: Multiple Choice the ability of management to report an earnings amount in each period less than actual earnings. the ability of management to use accruals to reduce the volatility of reported earnings over time. the ability of managem

Answer 1

Answer:

The ability of management to use accruals to reduce the volatility of reported earnings over time.

Explanation:

Income smoothing refers to the ability of management to use accruals to reduce the volatility of reported earnings over time. In income smoothing, revenues and expenses are shifted among different reporting periods to show the false or pseudo impression that the organization has steady and continuous flow of earnings. The basic aim and logic behind income smoothing is to show earnings in the period which have unusually very low earnings.