Which of the following statements is correct?
A)Accrual-based net income can be manipulated because it is based on estimates.
B)Cash flows are easily manipulated because they are based on estimates.
C)Accrual-based net income is not easily manipulated because valuation for such items as bad debts and inventory are precise and based on objectively verifiable information.
D)Cash flows are not easily manipulated because they are generated by internal transactions and do not involve external parties.

Question

Quizplus · Accepted Answer

Accrual-based net income is based on estimates such as those made for bad debts,inventory,and depreciation.It is therefore more easily manipulated than cash flow which is a result of transactions with external parties.

Which of the Following Statements Is Correct