Which of the following statements is correct?

Question

Quizplus · Accepted Answer

Revenues are recognized on the income statement when they are earned, which may or may not coincide with when payment is received from the customer. This is based on the accrual basis of accounting, which matches revenues with the expenses incurred in earning them. Expenses, on the other hand, may be recognized on the income statement when they are incurred (regardless of payment) or when they are paid, depending on the accounting method being used. Net income is calculated by subtracting all expenses (including dividends paid) from total revenues, and is not necessarily equal to the net cash generated by operations.

Which of the Following Statements Is Correct