Which of the following statements is true?
A)If a company reports net income on its income statement,it should report an increase in cash on its statement of cash flows.
B)If a company reports a net loss on its income statement,it should report a decrease in cash on its statement of cash flows.
C)If a company uses the accrual basis of accounting,it will improve its cash position if it reports net income for the same period.
D)If a company uses the accrual basis of accounting,its cash balance can increase even if it reports a net loss.

Question

Quizplus · Accepted Answer

If a company uses the accrual basis of accounting, its cash balance can increase even if it reports a net loss. This is because under accrual accounting, non-cash expenses such as depreciation are recorded, which reduce net income but do not affect cash flow. Additionally, the company may have collected cash from customers or received loan proceeds, which would increase the cash balance even if there is a net loss.

Which of the Following Statements Is True