Accounting profits and cash flows are generally:
A)the same since they reflect current laws and accounting standards.
B)the same since accounting profits reflect the timing of cash flows.
C)different because of GAAP rules regarding the recognition of income.
D)different because cash inflows must occur before revenue recognition.
E)the same due to the requirements of GAAP.

Question

Quizplus · Accepted Answer

Accounting profits and cash flows are generally different due to Generally Accepted Accounting Principles (GAAP) rules regarding the recognition of income. GAAP includes principles such as the revenue recognition principle, which allows companies to recognize revenue when it is earned rather than when the cash is received, leading to differences between accounting profits and cash flows.

Accounting Profits and Cash Flows Are Generally