Which of the following is NOT a reason that the income statement does not accurately indicate how much cash a firm has earned?
A)It includes cash inflows from services rendered.
B)It does not include entries for expenditures on inventory.
C)It does not include entries for collection of money from account receivables.
D)It includes entries for the depreciation of assets.

Question

Quizplus · Accepted Answer

The income statement includes cash inflows from services rendered, so this is not a reason why it does not accurately indicate how much cash a firm has earned. The other options are all reasons why the income statement may not be an accurate reflection of a firm's cash position. The expenditures on inventory are not reflected on the income statement as they are considered an asset until sold, and only then appear as a cost of goods sold. Account receivables collections are not reflected as cash earned until they are actually received. Depreciation of assets is included on the income statement as an expense, but it does not involve any actual cash outflows.

Which of the Following Is NOT a Reason That the Income