A printing company prints a brochure for a client,and then bills them for this service.At the time the printing company's financial disclosure statements are prepared,the client has not yet paid the bill for this service.How will this transaction be recorded?
A)The sale will be added to Net Income on the income statement and retained in Net Income on the statement of cash flows.
B)The sale will be added to Net Income on the income statement but deducted from Net Income on the statement of cash flows.
C)The sale will not be added to Net Income on the income statement but added to Net Income on the statement of cash flows.
D)The sale will neither be added to Net Income on the income statement nor used to adjust Net Income on the statement of cash flows.
E)The sale will be deducted from Net Income on the income statement but added to Net Income on the statement of cash flows.

Question

Quizplus · Accepted Answer

The sale will be recorded as revenue on the income statement, increasing Net Income. However, since the cash has not yet been received, it will be deducted in the cash flow from operations section of the statement of cash flows, adjusting the Net Income to reflect actual cash received.

A Printing Company Prints a Brochure for a Client,and Then