Which Method of Preparing Income Statements Provides the Most Information

question 111

Multiple Choice

Which method of preparing income statements provides the most information about future cash flows?

• A) accrual basis
• B) cash basis
• C) historical basis
• D) actual basis

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Definitions:

Total Assets

The sum of all current and non-current assets owned by a company, representing the total resources that can be used to generate future income.

Total Liabilities

The total amount of financial obligations a company owes to outside parties, including loans, bonds, accounts payable, and other debts.

On Account

A term indicating that a purchase has been made or services have been ordered with payment to be made at a later date, typically used in accrual accounting.

Calendar Year

A period of 365 days—or 366 days in a leap year—starting from January 1st to December 31st, used for financial and administrative purposes.