Coronado cannot use the income statement as a measure of cash flows because it is calculated on a(n)_______ rather than a(n)_______ basis.
A)annual;cash
B)annual;accrual
C)accrual;cash
D)cash;accrual

Question

Quizplus · Accepted Answer

The income statement is calculated on an accrual basis, which means that it records revenue when it is earned, rather than when cash is received, and expenses when they are incurred, rather than when they are paid. This can result in a mismatch between when revenue and expenses are recognized and when cash is actually received or paid out, making it unsuitable as a measure of cash flows.

Coronado Cannot Use the Income Statement as a Measure of Cash