Final answer:
The statement is true as companies experience multiple temporary differences in a year due to differing tax and financial accounting rules for recognizing income and expenses.
Step-by-step explanation:
The statement that a company usually has several temporary differences, both originating and reversing, in any particular year is true. These differences are a result of the discrepancies between tax accounting and financial accounting rules. In the context of accounting, temporary differences arise when certain income or expense items are recognized in different periods for financial accounting and tax purposes. For example, depreciation methods may differ between tax reporting and financial accounting, leading to temporary timing differences in recognizing expenses.
Reversing differences occur as these temporary differences resolve over time, affecting a company's deferred tax assets or liabilities. Management must carefully plan for the timing of these differences to manage effective tax rates and cash flows. Another example is when a company might estimate warranty expenses for financial accounting purposes but can only deduct them for tax purposes when they are actually paid.
Understanding the distinction between the short and long run is essential in business. In the short run, a company cannot alter fixed inputs like factory size or heavy machinery. In contrast, over the long run, companies can adjust all factors of production, including building new facilities, hiring workers, and expanding operations to meet the demand.