Asked by Avelina Milam on Jun 29, 2024
Verified
To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.
Accrual Basis
An accounting method where transactions are recorded when they are earned or incurred, regardless of when cash is exchanged, offering a more accurate financial picture.
Cash Basis
An accounting method where revenues and expenses are recorded when they are actually received or paid, not when they are incurred.
- Comprehend the process of converting accrual basis income to cash basis.
Verified Answer
ZK
Zybrea KnightJul 02, 2024
Final Answer :
True
Explanation :
Cash flows from operations are based on cash transactions, so the accrual basis of accounting used to prepare the income statement must be converted to the cash basis to arrive at accurate cash flow estimates.
Learning Objectives
- Comprehend the process of converting accrual basis income to cash basis.