One concept of income suggests that income be measured by determining the net change over time in the discounted present value of net cash flow expected to be received by the firm. Under this concept of income, which of the following, ignoring income taxes would not affect the amount of income for a period?
A) Providing services to outsiders and investments of the funds received
B) Production of goods or services not yet sold not yet delivered to customers or clients.
C) Windfall gains and losses due to external causes.
D) The method used to depreciate property, plant and equipment.

Question

Quizplus · Accepted Answer

The concept of income based on the net change in the discounted present value of expected net cash flows focuses on actual or expected cash transactions. Depreciation methods affect accounting income but do not directly impact cash flows, hence they would not affect the measurement of income under this concept.

One Concept of Income Suggests That Income Be Measured by Determining