Suppose a company generally records revenues and expenses before receiving or making cash payments.Which of the following statements is not true?
A)If sales are falling,net losses could occur even though the company reports a net cash inflow from operating activities.
B)If sales are rising,net profits could occur even though the company reports a net cash outflow from operating activities.
C)Net income and cash flows will always agree because even though revenues and expenses can be recorded in different time periods than their related cash flows the differences will cancel out and the results will be the same.
D)When the indirect method is used,net cash flow from operating activities includes adjustments for non-cash expenses such as depreciation which would cause net cash from operating activities to be different from net income.

Question

Quizplus · Accepted Answer

This statement is not true because net income and cash flows may not always agree. There may be timing differences between when revenue and expenses are recorded and when the related cash flows occur, which could result in differences between net income and net cash flows from operating activities. These differences may not always cancel out, especially if there are significant non-cash items such as depreciation or changes in working capital.

Suppose a Company Generally Records Revenues and Expenses Before Receiving