Which of the Following Statements Is True

question 10

Multiple Choice

Which of the following statements is true?

• A)The finance manager uses the framework of the income statement to find the operating income of the company (an accounting measure),which is also the true cash flow from operations.
• B)In accrual-based accounting,revenue is recorded at the time of sale if the revenue has been received in cash.
• C)Three fundamental issues separate net income and cash flow: accrual-based accounting,noncash expense items,and interest expense.
• D)Generally accepted accounting principles (GAAP)in the United States do not allow the use of accrual-based accounting to record revenue.

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Definitions:

Revenue Account

An account that tracks the income a company generates from its operations or activities.

Chart of Accounts

Chart of Accounts is an organized list of all accounts in a business entity’s financial statements, used for categorizing all financial transactions.

Business's Accounts

Records that summarize a company's financial transactions, including assets, liabilities, revenues, and expenses.

Expense

A cost or charge that is incurred in the process of generating revenue, typically classified on an income statement.