A firm's net income reported on its income statement must equal the operating cash flows on the statement of cash flows.

Question

Quizplus · Accepted Answer

A firm's net income reported on the income statement is calculated using accrual accounting, which includes non-cash transactions and items such as depreciation and amortization. The operating cash flows reported on the statement of cash flows, however, only include cash transaction during the period. Therefore, it is possible for the net income and operating cash flows to differ.

A Firm's Net Income Reported on Its Income Statement Must