Question

Which is more useful to the financial​ manager? ​(Select the best answer​ below.) A. The cash flow statement because it recognizes amounts that will not be collected​ and, as a​ result, will not contribute to the wealth of the owners. B. The income statement because it recognizes amounts that will not be collected​ and, as a​ result, will not contribute to the wealth of the owners. C. The cash flow statement because it recognizes revenues at the time of sale​ (whether payment has been received or​ not) and recognizes expenses when they are incurred. D. The income statement because it recognizes revenues at the time of sale​ (whether payment has been received or​ not) and recognizes expenses when they are incurred.

Answer 1

Answer:

D. The income statement because it recognizes revenues at the time of sale​ (whether payment has been received or​ not) and recognizes expenses when they are incurred.

Explanation:

The income statement in accordance to the accrual basis and matching concept recognizes revenues at the time of sale​ (whether payment has been received or​ not) and recognizes expenses when they are incurred.

The business exists for a profit motive and it is the income statement that reveals whether or not the company is doing so, on a monthly, quarterly and annual basis.

Again, the listing of all categories of expenses on the income statement makes it possible to focus attention on which cost has to be brought under control to improve profitability.