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.

Question

Business

Ellen Donovan

10 October, 15:01

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.

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Xavier Nguyen · Answer 1

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.