Which of the following statements is true?
A)The finance manager uses the framework of the income statement to find the operating income of the company (an accounting measure),which is also the true cash flow from operations.
B)In accrual-based accounting,revenue is recorded at the time of sale if the revenue has been received in cash.
C)Three fundamental issues separate net income and cash flow: accrual-based accounting,noncash expense items,and interest expense.
D)Generally accepted accounting principles (GAAP)in the United States do not allow the use of accrual-based accounting to record revenue.

Question

Quizplus · Accepted Answer

The statement correctly identifies the three fundamental issues that separate net income and cash flow, which are accrual-based accounting, non-cash expense items, and interest expense. The other statements are incorrect: A is incorrect because the operating income is not necessarily the same as the true cash flow from operations, as it may include non-cash expenses or changes in working capital; B is incorrect because revenue is recorded at the time of sale regardless of whether or not cash has been received; and D is incorrect because GAAP allows for the use of accrual-based accounting to record revenue, as it is a commonly accepted method of accounting.

Which of the Following Statements Is True