Which method of income measurement is used in the preparation of the income statement?
A) Capital maintenance approach.
B) Transaction approach.
C) Cash-flow approach.
D) Income components approach.

Question

Quizplus · Accepted Answer

The transaction approach is used in the preparation of the income statement, which focuses on recording all revenue and expenses during the accounting period regardless of when cash is exchanged. This method provides a more accurate depiction of a company's financial performance during a given period compared to the cash-flow approach or income components approach. The capital maintenance approach is used in determining the amount of profit to be distributed to shareholders or held as retained earnings, but it is not used in the preparation of the income statement.

Which Method of Income Measurement Is Used in the Preparation