An Auditor Is Reporting on Cash Basis Financial Statements

question 10

Multiple Choice

An auditor is reporting on cash basis financial statements.These statements are best referred to in his opinion by which of the following descriptions?

• A)Financial position and results of operation arising from cash transactions.
• B)Assets and liabilities arising from cash transactions,and revenue collected and expenses paid.
• C)Balance sheet and income statement resulting from cash transactions.
• D)Cash balance sheet and the source and application of funds.

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Definitions:

Operating Expenses

Recurring expenses related to the central operations of a business, such as rent, utilities, and payroll, excluding costs of goods sold.

Earnings Per Share

A measure of a company's profitability, calculated as the net income divided by the number of outstanding shares of common stock.

Common Stockholders

Individuals or entities that own shares of common stock in a corporation, giving them rights to dividends and voting in shareholder meetings.

Net Income

Net earnings of a company, calculated by subtracting all costs, including taxes and expenses, from its overall revenue.