The standard financial statements prepared by accountants have to be modified for managerial purposes.Related to these modifications,which of the following statements is correct?

Question

Quizplus · Accepted Answer

The standard financial statements prepared by accountants focus on accounting income, not cash flows. However, for managerial purposes, it is important to analyze cash flows as they provide a more accurate measure of a company's ability to generate cash and pay bills. Additionally, accounting income and cash flows can be quite different during any given accounting period due to differences in the timing of revenue recognition and cash receipts, as well as the accrual of expenses. Therefore, modifications to the standard statements are necessary for managerial purposes to provide a more accurate reflection of a company's financial position and performance.

The Standard Financial Statements Prepared by Accountants Have to Be