Which of the Following Statements Is CORRECTσ

question 8

Multiple Choice

Which of the following statements is CORRECTσ

• A) the income statement for a given year is designed to give us an idea of how much the firm earned during that year.
• B) the focal point of the income statement is the cash account, because that account cannot be manipulated by "accounting tricks."
• C) the reported income of two otherwise identical firms cannot be manipulated by different accounting procedures provided the firms follow generally accepted accounting principles (gaap).
• D) the reported income of two otherwise identical firms must be identical if the firms are publicly owned, provided they follow procedures that are permitted by the securities and exchange commission (sec).
• E) if a firm follows generally accepted accounting principles (gaap), then its reported net income will be identical to its reported net cash flow.

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Definitions:

Net Purchases

The total cost of purchases made by a company after deducting any returns, allowances, and discounts.

Cost of Goods Sold

The immediate expenses linked to manufacturing goods for sale within a business, encompassing both materials and workforce costs.

Credit Sales Transactions

Transactions where goods or services are sold to a customer with an agreement that payment will be made at a later date.

Perpetual Inventory System

An accounting method that records inventory purchases and sales in real-time, continuously updating inventory balances.