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 entries for the depreciation of assets.
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 cash inflows from services rendered.

Question

Quizplus · Accepted Answer

The income statement includes both cash and non-cash items, affecting its reflection of actual cash flow. Depreciation (A) is a non-cash expense, inventory purchases (B) are not directly shown but affect cost of goods sold, and collections from accounts receivable (C) affect revenue recognition but are not cash transactions. However, cash inflows from services rendered (D) are part of the income statement's depiction of revenue, making it not a reason the statement fails to indicate actual cash earned.

Which of the Following Is NOT a Reason That the Income