A limitation of the income statement and balance sheet is that they do not provide much information about a business' cash management because they are based on accrual accounting.

Question

Quizplus · Accepted Answer

The income statement and balance sheet are prepared under the accrual basis of accounting, which recognizes revenues when earned and expenses when incurred, regardless of when cash is received or paid. This approach does not directly show cash inflows and outflows, thus providing limited information about a business' cash management.

A Limitation of the Income Statement and Balance Sheet Is