Carl Cannot Use the Statement of Profit or Loss and Other

question 25

Multiple Choice

Carl cannot use the statement of profit or loss and other comprehensive income as a measure of cash flows because it is calculated on a(n) _______ rather than a(n) _______ basis.

• A)annual; cash
• B)annual; accrual
• C)accrual; cash
• D)cash; accrual

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Definitions:

Merchandise Inventory

The goods a company intends to sell to customers that are considered current assets on the balance sheet.

Gross Profit

The difference between sales revenue and the cost of goods sold before deducting overheads, payroll, taxation, and interest payments.

Accounts Receivable

Represents money owed to a business by its customers for goods or services delivered on credit.

Merchandise Purchases

The total cost incurred by a retail company to buy goods for resale during a particular accounting period.