Kate is the Executive Director of a local food bank and is assessing the financial situation of her not-for-profit organization.Kate uses a(n)________ to determine whether revenues from contributions and other sources will cover operating costs.

Question

Quizplus · Accepted Answer

Kate would use the income statement to determine whether the revenues from contributions and other sources will cover operating costs. The income statement shows the revenues and expenses for a specific period and helps to determine the profitability of the organization. The statement of cash flows would show the cash inflows and outflows, but it may not provide a clear picture of the organization's ability to cover operating costs. The balance sheet shows the organization's assets, liabilities, and equity at a specific point in time, but it does not indicate whether the revenues will cover operating costs. Accrual accounting is a method of accounting that recognizes revenue and expenses when they are earned or incurred, regardless of when cash is exchanged. It is not a tool or statement used to determine whether revenues will cover operating costs.

Kate Is the Executive Director of a Local Food Bank