The income statement shows the difference between a firm's income and its costs¾i.e., its profits¾during a specified period of time.However, not all reported income comes in the form or cash, and reported costs likewise may not correctly reflect cash outlays.Therefore, there may be a substantial difference between a firm's reported profits and its actual cash flow for the same period.

Question

Quizplus · Accepted Answer

The statement accurately describes the differences that can exist between a firm's reported profits on its income statement and its actual cash flow.

The Income Statement Shows the Difference Between a Firm's Income