Large Corporations Are Allowed to Use the Cash Method of Accounting

question 49

True/False

Large corporations are allowed to use the cash method of accounting for at least the first two years of their existence.
A corporation may not use the cash method of accounting in the second year if it reported more than $5 million in gross receipts in the first year.

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Definitions:

Divisional Income

The earnings generated by a specific division or segment of a company, highlighting its financial performance.

Service Department Expenses

Expenses incurred by the support departments within a company that do not directly contribute to the production of goods or services but are necessary for operation.

Net Income

The amount of profit left over after all expenses and taxes have been subtracted from total revenue.

Return on Investment

A financial metric used to evaluate the efficiency or profitability of an investment, calculated as the profit from an investment divided by the cost of the investment.