Which of the following statements is TRUE?
A)The finance manager uses the framework of the income statement to find the operating income of the company (an accounting measure),which is also the true cash flow from operations.
B)In accrual-based accounting,revenue is recorded at the time of sale if the revenue has been received in cash.
C)Three fundamental issues separate net income and cash flow: accrual-based accounting,noncash expense items,and interest expense.
D)Generally accepted accounting principles (GAAP)in the United States do not allow the use of accrual-based accounting to record revenue.

Question

Quizplus · Accepted Answer

The statement correctly identifies the three fundamental issues that separate net income and cash flow: accrual-based accounting, noncash expense items, and interest expense. The other statements are false. The finance manager uses the income statement to find net income, not operating income, and net income is not the same as true cash flow from operations. In accrual-based accounting, revenue is recorded when it is earned, not necessarily when it has been received in cash. GAAP in the United States requires companies to use accrual-based accounting to record revenue.

Which of the Following Statements Is TRUE