Which of the following is a true statement?
A) Accounting income is generally equal to ﬁrm cash ﬂow.
B) Accounting statements are usually prepared to match the timing of income and expenses.
C) The statement of ﬁnancial position equity account represents the market value of the ﬁrm to shareholders.
D) The statement of ﬁnancial position tells investors exactly what the ﬁrm is worth.
E) Assets are usually listed on the statement of ﬁnancial position at market value.

Question

Quizplus · Accepted Answer

Accounting statements are prepared using accrual accounting, which aims to match income and expenses to the period in which they were incurred. This does not necessarily reflect the actual timing of cash inflows and outflows. Choice A is incorrect because accounting income and firm cash flow are not always equal. Choice C is incorrect because the equity account on the statement of financial position represents shareholders' ownership interest in the firm, not the market value of the firm. Choice D is incorrect because the statement of financial position provides information on the firm's assets, liabilities, and equity, but it does not directly provide information on the firm's overall value. Choice E is incorrect because assets are typically listed on the statement of financial position at their historical cost, not market value.

Which of the Following Is a True Statement